In The Crisis Of Survival, Sasa International Can Hardly Conceal The Decay.

Is the retail industry in Hongkong really out of control? This is one of the topics that I have talked about in the past few years after eating tea.

In this rapidly changing era, Hongkong seems to have found the standard answer in the past two years: the retail industry is really in urgent need this time.

Looking back at the experience of the retail industry in Hongkong since mid - last year, difficulties can be seen in waves. This is a real despair, because Hongkong's retail industry has fallen into the pit before it has responded. In the cold wind of the retail industry in Hongkong, a large number of mainland companies have also saved money. Hongkong retailers complain about it, including 00178-HK, a local cosmetics retailer in Hongkong.

Hongkong is a shopper's paradise. Cosmetics are one of shoppers' favorite purchases and are highly sensitive to market changes. There is no doubt that Sasa international has fallen into a crisis of survival in the retail industry in the winter.

Sales of Hong Kong and Macao during the Spring Festival fell 76.9% year on year

Sasa international, who had just recovered from the events of last June in Hongkong, suffered from the impact of a new epidemic of coronary pneumonia in the process of entering the rat year.

In February 6th, Sasa International announced that the group's performance in retail sales in Hongkong and Macao during the Spring Festival was inferior, down 76.9% from last year, while same store sales fell 75.5%.

In the Hongkong market, Sasa's international retail sales dropped by 77.9% compared with last year, mainly due to the impact of the new coronavirus case. The number of mainland visitors dropped again on the basis of the incident, and the consumption desire of Hongkong local customers was also in the doldrums. According to the information of the Immigration Department of Hongkong, the number of visitors to the mainland dropped by 85.5% during the new year. The sharp drop in overall passenger volume led to a 54.4% drop in overall trading volume, while mainland customers dropped by 92.1% while local customers in Hongkong dropped by 8%.

In addition to the Hongkong market, Sasa International's Macao market has not been spared. Retail sales in the Macao special economic zone fell 73.4% from last year, mainly due to a drop of nearly 70% of the total volume of transactions. Among them, mainland customers dropped by 76.5%, while local customers in Macao dropped by 29.4%.

The impact of this epidemic has just begun and how long it lasts. Many experts in the country can not give specific answers. So did Sasa international sales really fall to the bottom during the Spring Festival? The answer is almost no, 17 years ago, the SARS lasted for half a year and was completely curbed in the summer of 2003. In 2003, when the SARS ravaged in 2003, the retail sector in the cold market declined by 2.6%. If the Hongkong retail industry suffered the biggest crisis since SARS in the second half of last year, the aggressive epidemic is deeper and wider than the crisis caused by the incident, because the outbreak coincided with the Spring Festival, which affected the scope and severity of the disease for ten years, and it is still far away from the summer which is very conducive to the containment of the virus.

Sasa international recorded a net loss of HK $36 million 530 thousand in the 6 months ending last September, compared with HK $200 million in the same period last year. This also led to Sasa's first international interim loss in 17 years, and Sasa international has said that it will not distribute medium-term interest, thus ending the history of the continuation of the medium-term interest rate since 2000. The medium-term deficit was mainly due to the impact of Hongkong's start in June 2019. From June 2019 to November 18th, Sasa's International Hong Kong and Macao market sales and sales in the same store plummeted by 39.4% and 39.1% respectively. The sales volume and sales of same store during the Spring Festival this year were nearly two times that of the previous period, indicating that the crisis brought by the epidemic is the most serious. As the epidemic continues, Sasa International's performance in 2020 will not be optimistic.

Sasa's international stock price fell accordingly as the epidemic raged. January 20th -2 7, Sasa international stock price cumulative decline of 20.99%, refresh the new low since 2008 December.

Diversify oneself to save, executive director takes the lead to reduce salary 75%!

Sasa international is one of the most famous cosmetics retail groups in Asia, and has been in existence for 42 years. At its peak, Sasa international has 273 retail outlets in 2018, operating income of over HK $8 billion, selling over 700 brands, and altogether over 18 thousand kinds of skin care products, perfume, cosmetics and hair care products, as well as its own brand and exclusive agent's famous brand products.

But in 2019, Sasa international declined. According to Sasa International's results for the third quarter ended December 31, 2019, the number of Sasa's international retail outlets dropped to 265.

In the context of Hongkong's deteriorating operating environment and high costs, the first loss in the interim report, Sasa International said in January this year that it plans to close some 20% to 25% shops in the next 18 months, mostly in the most influential tourist areas, and has closed 6 in the third quarter of fiscal 2019, including the loss of Singapore business.

In addition, Sasa International's stock is held in cash. Excessive inventory will seriously affect the cash flow of enterprises. Although the inventory level in September 30, 2019 dropped by HK $222 million, it still amounted to HK $1 billion 492 million. To ease the high cost of inventory, Sasa international has announced that it will increase product management and inventory management, clean up low productivity products or excessive inventories, so as to make room for high-volume sales and attract popular products effectively.

Sasa's heavier international throttling action is ahead. Recently, the company issued a tough trick, all executive directors will be the first to reduce wages by 75% or three months, as the first step in a new round of cost reduction programs. It is worth noting that in order to control costs, Sasa international reduced its number of employees in the -2019 fiscal year 2017 in fiscal year 200, and the employee welfare expenditure for the six months ended September 30, 2019 dropped to HK $555 million. During the reporting period, the remuneration of Sasa international directors was only HK $671 thousand, which was only 0.012% of the current employees' welfare expenditure.

This shows that the double blow of the Hongkong incident and epidemic situation directly affects the survival of Sasa international, and has brought out the policy of cutting down the executive pay of Sasa international.

In fact, under the predicament, many of the affected enterprises in Hongkong have laid off or reduced their salaries to achieve the effect of "epidemic prevention". Recently, 01314-HK, holding the famous restaurant brand "Cui Hua tea restaurant" in Hongkong, has recently announced that "all directors and senior executives will receive a salary reduction of 30% for a period of three months", while the Hongkong air plan cuts about 400 employees, accounting for about company staff. 10% of the total work.

2020 is worse than 2019.

Retail sales in Hongkong are still in decline. Sasa's international revenue comes mainly from the Hong Kong and Macao market (accounting for over 8). Under the overall decline of the local retail industry, the pressure of Sasa international operation can be imagined.

Affected by the incident, the number of initial visitors to Hongkong in 2019 was 55 million 910 thousand, with an annual decrease of 14.2%. Retail, tourism and catering industries were the first to bear the brunt. Hongkong GDP was dragged down by 1.2% at 2019.

The Hongkong Statistical Office announced that retail sales continued to have double-digit declines in the second half of last year. Last year, the total retail sales value was temporarily estimated at HK $431 billion 200 million, down 11.1% from an annual rate, the first decline in 3 years and 8.7% in 2018. Xie Chiu an, chairman of Hongkong Retail Management Association, recently said that Hongkong's retail market has entered "super cold winter".

Among them, from the second half of 2019 to now, the total retail sales of Hongkong's medicine cosmetics have fallen far beyond expectations. With the uncertainty of the duration of the epidemic, the recovery time of Hongkong's local retail industry and tourist confidence will be longer than one year.

Xie Qiu Yi pointed out that retail sales in the first half of this year will decline from 10% to 20%, but without considering the epidemic factors, the retail sales will decline more than 10% to 20% in the first half of the year.

If Sasa international fell to the bottom of history in 2019, in the gloomy market, Sasa International's Hongkong retail market in 2020 will continue to fall deeper. Can Sasa international turn over the mainland market outside Hong Kong and Macao? The answer is No. In order to get rid of its dependence on the Hong Kong and Macao market, Sasa international adjusted its regional revenue structure in 2005 to expand its stores to the mainland market. But the ideal is plentiful, but the reality is very cruel: Sasa international has been struggling to make profits in the mainland for nearly 14 years. In the 2015 fiscal year -2019, the annual deficit is 10 million Hong Kong dollars -4000 million. In the 2020 fiscal year, the mainland market revenue accounted for 3.8% of the total.

Conclusion: Hongkong's retail industry has been exacerbated in this special period. Sasa international highly depends on the Hongkong market. The income of Hong Kong and Macao depends on the number of mainland visitors and exchange rate fluctuations, resulting in large fluctuations in company performance. In 2020, Hongkong's retail industry will not be optimistic, and Sasa international will experience colder winter than 2019.