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Mar 31, 2010
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Hengdeli says first quarter sales up, eyes jewelry business

By
Reuters
Published
Mar 31, 2010

By Donny Kwok and Fion Li

HONG KONG, March 31 (Reuters) - Luxury watch retailer Hengdeli Holdings (3389.HK) saw its retail sales in the first quarter rise 35 percent from a year earlier and expects growth to continue as China's economy expands, its chairman said Wednesday 31 March.


Elegant Watches, a Xinyu Hengdeli brand

"We are very optmistic (over the growth) for the whole year as (consumption) confidence returns," chairman Zhang Yuping told reporters in a small group interview, adding watches in the 10,000-50,000 yuan ($1,465-$7,326) range would see the strongest growth in 2010 in first tier cities in the mainland.

To tap the growing market in China, Hengdeli, a partner of French luxury goods maker LVMH (LVMH.PA), plans to spend up to 400 million yuan to open more than 50 new outlets in second- and third-tier Chinese cities this year, as well as several more in Taiwan and Hong Kong.

Zhang said such cities were expected to drive growth in the consumer sector in future as their spending power increased with urbanisation.

The firm operated a total of 270 retail outlets in China, Hong Kong, and Taiwan as at the end of 2009, an increase of 60 outlets from the prior year, and posted about 11 percent same store retail sales growth in China last year.

Zhang said China had recorded single digit growth in order volume in 2009 and double digit growth was expected for this year.

"We will benefit if the yuan appreciates."

EYES ON JEWELRY BUSINESS

Hengdeli plans to focus on the development of its jewelry business this year, aiming to boost share of a market about seven times the size of the watch market in China in terms of sales and with a 2-3 percent higher profit margin, Zhang said.

"Our target is to have the jewellery business contribute 20-30 percent of our revenue in five years," Zhang said, up from just 1 percent currently.

Hengdeli on Tuesday 30 March posted a 20.7 percent drop in 2009 profit to 364.8 million yuan ($53.45 million) due to effect of fair value valuation on convertible bonds, while its total sales grew 6.9 percent to 5.899 billion yuan.

Shares of Hengdeli trimmed losses and fell 3.54 percent to HK$3.27 by 0639 GMT on Wednesday 31 March. The stock has risen 10.2 percent so far this year, against a 2.7 percent fall in the broader market .HSI. (US$1=HK$7.76) (Reporting by Donny Kwok; editing by Jonathan Hopfner)

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