The Zhitong Finance App learned that on April 15, the stock price of Sa Sa Sa International (00178) suffered a severe drop. By the close, it had fallen by more than 9% to HK$0.7 per share. After the market on Friday, Sa Sa Sa International announced that for the fourth quarter from January 1 to March 31, 2024, the Group's turnover fell 4.1% year on year to HK$1,041 million. Among them, the Group's offline sales fell 8.7% to HK$864.7 million, while the Group's online sales increased 27.1% to HK$176.2 million, accounting for 16.9% of total turnover.
During the reporting period, offline sales and same-store sales in the Hong Kong and Macau Special Administrative Regions decreased by 7.4% and 10.9%, respectively; online sales in the Hong Kong and Macau Special Administrative Regions fell 11.7% year on year to HK$48.1 million. By the end of March, although the number of stores operated by the Group in Hong Kong and Macau was 36 to 82 fewer than before the pandemic, sales had recovered to 42.5% before the pandemic.
In the mainland, sales increased 18.2% year over year to 150 million yuan, accounting for 14.4% of total turnover, while same-store sales fell 23.2% year over year. By the end of March, the number of Sa Sa's stores operating in the mainland decreased by 5 to 32 compared to the same period last year, and offline sales fell 30.5% year over year to RMB 40.5 million.
According to the above announcement, under the influence of last year's high base, the total online and offline sales of the Hong Kong and Macau Special Administrative Region reached HK$807 million during this period, but there is still a difference of HK$66.5 million compared with the same period last year. Salsa International said that more and more Hong Kong residents are “going north” to spend in mainland cities, making the local market quiet, especially in residential areas close to the Shenzhen gateway. The situation was most obvious on weekends and public holidays, which affected sales during the period. The number of Hong Kong residents visiting the Mainland during the Spring Festival this year was about 1.16 million, nearly double the number of mainland visitors to Hong Kong of about 650,000. However, the overall situation of visitors to the Hong Kong and Macao Special Administrative Regions during this period was not ideal as expected. Furthermore, due to economic challenges putting pressure on the stock market and real estate market, the spending power of local customers in Hong Kong has also been affected.
Sa Sa Sa International also mentioned that Qingdao and Xi'an were included in the Hong Kong Special Administrative Region's free travel plan on March 6, and it is expected that more and more cities will join in the future. At the same time, we also welcome the HKSAR Government's further policy revisions to attract more visitors to the HKSAR and increase their duty-free spending in Hong Kong.
Sa Sa International increases its exclusive brand portfolio, and the company's gross margin continues to improve
According to information, due to the three-year epidemic, Sa Sa Sa International's cumulative loss for the three fiscal years of FY2020 to FY2022 exceeded HK$1.2 billion. Subsequently, thanks to the gradual recovery of the retail industry in the Hong Kong and Macau markets after the epidemic, Sa Sa Sa International's performance began to slowly rise after the bottom. The company recorded a turnover of HK$3,501 billion in fiscal year 2023, with a profit of HK$58,247 million during the year, which turned a sharp loss into profit.
According to information, in order to improve the financial situation, in recent years, Sa Sa Sa International has strengthened product procurement to enrich its product portfolio. In addition to core categories such as skincare products, makeup, and perfume, it has also begun to add other categories including internal beauty, personal care, and beauty equipment, increasing its exclusive brand portfolio to meet market trends and customer needs. This strategy continued to improve the company's gross margin for fiscal year 2023 from 35.5% in the first quarter to 43.5% in the fourth quarter.
Furthermore, the mainland China market has always been the core focus of Sa Sa Sa International's long-term strategy. According to the plan, Sa Sa International will continue to explore online and offline linkage strategies in mainland China, and connect with customers through Douyin live broadcasts, WeChat applets, etc. On the other hand, Sa Sa International is also focusing on expanding the possibilities of Hainan's duty-free and other channels in mainland China. On November 20 of last year, He Ronghui, the chief financial director of Sa Sa Sa International, said in an interview that Sa Sa International hopes to expand its business in mainland China and is seeking to increase sales through e-commerce and social media channels.
Professional analysts believe that compared to the mainland, operating costs are higher in Hong Kong. As a retail industry, Sa Sa Sa International is not only pressured by operating costs, but also faces competition from e-commerce platforms. Furthermore, now the post-90s and post-00s have become a new type of consumer group. They have more requirements for the fashion and quality of products, and market competition is bound to become more and more intense. In the future, Sa Sa Sa International should step up its product selection efforts to continuously meet the needs of the new generation.