Milan Station doubles presence in Macau

2014/8/22

From：Macau Business Daily

It posted a record 60 percent jump in sales for the first half. But a hefty rent hike is forcing handbag retailer Milan Station to move on.

Hong Kong listed handbag retailer Milan Station Holdings Ltd is planning to expand its retail points in the city’s ‘clubhouses’ amid booming sales here, while suffering from a widening loss for the group for the first half of this year.
Milan Station said sales here surged 58.2 percent year-on-year to HK$55.2 million (US$6.9 million) for the first six months this year in its interim results filed with the Hong Kong Stock Exchange after trading hours on Wednesday.
‘The growth was mainly attributable to the sale of the group’s high-priced products, which target those customers with high spending power, in exclusive clubhouses in Macau,’ the company noted in the filing, adding that its sole high street retail shop in Rua de S. Domingos also reported ‘solid’ sales for the first half of this year.
Business Daily asked Milan Station to confirm whether the ‘clubhouses’ mentioned refer to the firm’s retail points situated in the VIP lounges of the casinos in the city but the firm responded that it was ‘not convenient’ to clarify the nature of the clubhouses.
The retailer said in its 2012 annual report that it wanted to open ‘specialty counters in the VIP lounge of the premier casinos in Macau’ and it also mentioned in May last year that they had ‘succeeded in striking a deal with an exclusive clubhouse in Macau to set up a point of sale in the latter’s entertainment premises.’

Ten sales points

To further boost sales growth, Milan Station said in its interim results report that it planned to increase the number of sales points from six to ten in ‘exclusive clubhouses’ in Macau.
Despite the first half sales boom recorded for Macau, escalating rental costs are weighing on the firm’s operation here, prompting it to relocate its branch store.
In order to reduce its rental expenses, Milan Station said in the filing that it will move its branch store from the prime tourist destination of Rua de S. Domingos to Rua da Palha, a nearby street.
Milan Station told Business Daily that the monthly rental of the new location, which its branch store would move to by mid-September, is 60 percent less than the current site in Rua de S. Domingos. The owner of the S. Domingos branch store site had requested a 30 percent hike in rent.
For the first half of this year, the retail rentals in the major tourist spots of S. Domingos and S. Paulo areas saw the strongest growth, while overall retail rentals for the Macau market recorded a 7.4 percent year-on-year growth for the second quarter this year, estate agency Jones Lang LaSalle Macau stated in its half-year review.
The agency cited examples in the review of three new retailers taking up shop space in Rua de S. Domingos in the first half of this year for monthly rentals of HK$600,000 to HK$1.1 million.

Widening loss

Revenue contributed by the Macau market accounted for 16.8 percent of Milan Station’s total revenue at about HK$329.3 million, while gross profit margin of the firm’s operations here is the highest at 35.8 percent when compared with Hong Kong, mainland China and Singapore.
Milan Station has suffered from a first half group-wide loss of about HK$19.8 million amid dampened consumer sentiment in Hong Kong and mainland China following the continuing slowdown in the luxury retail market. The loss figure of the firm in the same period last year was about HK$10.4 million.
Milan Station cited optimism for the Macau retail market, saying that the luxury goods sector could see “steady development” against the backdrop that more high-end international brands would be attracted here with the ongoing construction of 5-star hotels, shopping centres and casinos.
For the firm’s major market for sales, Hong Kong, a darker picture emerged as Milan Station said they saw more mainland Chinese tourists from the second and third-tier cities travelling in the city that had “weak spending power”, and were on same-day return trips.
A challenge confronting the firm in the Hong Kong market is the shift in overall consumption patterns of mainland visitors travelling under the individual visit scheme, who are opting for mid-range and low-priced cosmetics, clothing and shoes.

Copyright@Macau Business Daily