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Challenging operating environment impacts Stella

Sep 13, 2016 Hong Kong
Challenging operating environment impacts Stella
According to the Hong Kong-based group the decline in casual footwear orders was a leading contributor to lower shipments and revenue in quarter two
Stella reported second quarter unaudited consolidated revenue of approximately 437.2 million US dollars in the quarter (compares to 499.2 million US dollars in similar period in 2015) and 717.5 million US dollars for the first semester (797.2 million US dollars in similar period in 2016). This represents a decline of approximately 12.4% and 10.0% respectively.

Revenue from manufacturing operations fell by 10.7% and by 9.1%, totaling, respectively 422.0 million US dollars and 689.6 million US dollars in the three and six months ended on the 30th of June 2016.

Shipment volumes also declined, by 4.5% and 4.5%, over the same periods to 14.8 million pairs and 25.4 million pairs respectively.

According to Stella the fall in revenue and shipment volumes was mostly attributable to fewer orders for footwear products, particularly in the casual segment. Lower efficiencies and margins caused by the lower utilisation of non-sports footwear factories also impacted the manufacturing operation

A slight improvement in the performance of the retail business in China in the quarter was registered, however, on a year-on-year basis, sales of the Stella Luna, What For, JKJY by Stella and Pierre Balmain branded footwear products in China fell by 15.7% (totaling 17.7 million US dollars).

As at the 30th June 2016, the group operated a total of 175 Stella Luna stores, 57 What For stores and 1 JKJY by Stella store. It no longer operates Pierre Balmain stores in China.

The Hong Kong based group expects a challenging operating environment in the second half of the year, as a result of the consequences of the recent ‘Brexit’ vote and the  effect it has on consumer confidence and economic growth in Europe, but also, with the impacts of presidential election campaign in the United States, coupled with a slowing global economy, may also affect demand for the Group’s footwear products.

Mr. Lawrence Chen, Chief Executive Officer of the Group, commented on the Group’s performance: “The decline in revenue and shipment volumes in the first half of the year has been disappointing. Our focus now is to further improve our manufacturing processes and the quality of our products as we further emphasize our production outside of China, ensuring a smooth transition.”

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