Earnings for the first quarter of 2019 fell short of expectations. Revenue for the first quarter of 2019 fell 10.8% year over year, and fell 8.5% year over year at a fixed exchange rate. Revenue for Q1 2019 was only 22.7% of our full-year forecast (26.4% for Q1 2018).

Overall comparable store sales (CSS) fell 10.7% year over year in the first quarter of 2019, the worst decline in history. There was a net decrease of 35 stores in the first quarter of 2019, mainly in mainland China and the rest of the Asia-Pacific region. As of March 31, 2019, the total number of stores reached 2,391.

Net profit forecasts for 2019 to 2021 were lowered by 9.9%, 8.9% and 6.6% respectively to HK$493 million, HK$547 million and HK$607 million, based on lower revenue forecasts. Weak performance across all channels in the first quarter of 2019 increased our concerns about the company's business growth throughout the year. As a result, we lowered our revenue forecasts for 2019-2021 by 2.4%, 2.7% and 2.7% to HK$5.580 billion, HK$5.757 billion, and HK$5.948 billion, respectively.

The target price was lowered to HK$4.20 and downgraded to the “collection” rating. The severe decline in revenue in the first quarter of 2019 lowered our expectations for the company's 2019 full-year results, as the weak performance in Greater China is likely to continue into the remaining months of 2019. However, the company will still maintain a high payout ratio over the next few years, which makes its dividend returns very attractive. We lowered our target price from HK$4.60 to HK$4.20, which is equivalent to 13.5 times, 12.1 times and 10.9 times the price-earnings ratio of 2019, 2020 and 2021, respectively, and an increase of 8.8%.