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Hengdeli Says Mid-range Watch Market Looks Promising
HONG KONG, Jun 06, 2012 - (ACN Newswire) - According to the recent report by Reuters, Hengdeli Holdings Ltd. <3389.HK>, a luxurious watch retailer in the Greater China, said economic uncertainties caused by Europe's debt crisis, the depreciation of the euro and the Chinese government reshuffle resulted in a low momentum for sales of luxury goods such as high-end watches in the first half of the year, and that the market is expected to revive in the second half with the launch of steady growth measures.
Zhang Yuping, chairman of Hengdeli, which has an over 30% share of China's high-end watch market, said the company expects to see a "low double-digit growth" in same-store sales this year, a significant drop compared with the 36% increase for 2011. However, the mid-range market outlook is still promising due to increasing disposable income in China, he added.
Europe's debt crisis dampened consumer confidence and the dropping euro attracted foreign shoppers, he explained, adding that the Chinese government reshuffle also pushed down sales of luxurious watches priced above RMB50,000 with a mere single-digit growth, as compared to the double-digit increase for the same period last year. However, as the government maintains its steady growth measures in the second half, a certain level of recovery can be expected but the growth is not likely to be comparable with last year's figure, he said.
Zhang, whose company distributes watches of Cartier and Vacheron Constantin, said, "The external environment still has its psychological influences. Chinese people are wealthy but lack the chance for shopping and spending. Foreigners want to shop but lack the money."
Bullish view on the sales of midrange watches
But Zhang also said with the progression of urbanization in China and the increase in people's disposable income, there is a bullish view on the midrange watches priced under RMB30,000.
"With the expansion of the middle class and urbanization, the retail sales beat our expectation and recorded a high double digit growth this year," Zhang said.
Guo Qi, an analyst from KGI also said, "Sales of midrange watches look fine and will be supported by the summer vacation effect in the third quarter."
She pointed out that the company adjusted its sales target in April from a 20% growth to midteen (14%-17%), which should be achievable.
Hengdeli, whose shareholders are Swatch Group from Switzerland and the LVMH Group from France, announced earlier that the net profit grew 47.1% year-on-year to RMB815 million as at the end of December 2011 and turnover increased 38.5% year-on-year to RMB11,375 million, with nearly 70% from mainland China and approximately 28% from Hong Kong.
The Group had 405 retail outlets in the Greater China at the end of last year, representing a year-on-year increase of 55 outlets.
Zhang said this year he plans to open more than 40 stores, of which 95% will be selling midrange watches, and will maintain the strategy of opening stores in the second- and third-tier cities in China.
Elegant, Prime Time/ Hengdeli and With Time of Hengdeli are the sales channels for its top-tier watches, mid-range watches and fashionable watches respectively. Its competitors include Emperor Watch & Jewellery <0887.HK> and Oriental Watch Group <0398.HK>.
He also said there is no room for price hike this year due to the depreciation of the euro and sufficient supply.
In addition, the market is paying attention to the "buyback" of high-end watches, which means some customers sell the high-end watches they bought to the company at a big discount. Zhang said the sales channels of Hengdeli do not have such a kind of transaction.
"We offer good services and our customers clearly understand their purposes and needs before the purchase. We do not have such kind of transaction," Zhang said.
Source: Reuters
Source: Hengdeli Holdings Ltd
Sectors: Retail & eCommerce, Daily Finance
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