Giordano to open megastore in Suntec

Encouraged by robust sales in its South-east Asian markets, Giordano International will open this region's first megastore in Suntec City in July.

The casual apparel chain's 8,000-square-foot flagship store, South-east Asia's largest, follows on the heels of 10 similar ones which have debuted in the past year in South Korea, the market Giordano picked to road-test its megastore concept.

Whether the chain will open more such megastores here after the Suntec one remains to be seen, Giordano's director of South-east Asia operations Patrick Yeo told The Business Times.

"We'll have to monitor the performance of the Suntec store before deciding on our next move," he said, adding that the group plans to roll out at least 100 megastores in major Asian cities.

The chain is due to open more outlets of humbler dimensions here this year, including 1,500-sq-ft ones in Jem in Jurong and Bedok Mall; other potential outlets are in the pipeline as well, but Mr Yeo declined to disclose details because the leases for these have not been signed.

"Giordano is investing at least S$5 million in Singapore in the next two to three years, which is a little bit more than in other countries, due to the more competitive retail scene here," he said.

A portion of this investment will go towards strengthening its brand; the next marketing initiative will put it in partnership with Walt Disney to come up with merchandise for the upcoming animated film, Monsters University.

The investment will also pay for works to improve store ambience. In the past year, its outlets at Changi Airport Terminal 1 and 2, Parkway Parade, Plaza Singapura, Bugis Junction and Ang Mo Kio Hub have been revamped, Mr Yeo said.

Sales figures from Giordano's "Rest of Asia-Pacific" market - which includes Singapore, Malaysia, Thailand, Indonesia, and Australia - were the bright spots in the company's latest first-quarter operational results. The numbers rose 12 per cent to HK$377 million (S$61.5 million) year on year, making up a quarter of the group's total sales.

On its own, Singapore contributed HK$106 million (7 per cent) of Giordano's HK$5.7 billion total sales in Q1, a 3 per cent improvement from a year ago.

Taken as a whole, however, Giordano pulled a relatively weak quarter. Sales rose 6 per cent on-year, but dipped one per cent after discounting the effect of its acquisition last year of a controlling interest in its franchise operations in the United Arab Emirates and Saudi Arabia.

Giordano blamed China and Taiwan for the poor Q1 turnover. Weak consumer sentiment in China shrank sales by 5 per cent; sales in Taiwan slid 15 per cent, hurt by the heavy discounting environment.

The earnings picture was not better: Gross profit rose 11 per cent to HK$905 million from a year ago, but once the Middle East acquisition was factored in, earnings were flat year on year.

Flagging sales have prompted Giordano to shutter 163 loss-making stores in China since March last year, leaving it with 1,207 outlets as at end-March.

Still, China is the company's key market for its growth strategy, chairman and chief executive Peter Lau Kwok Kuen said this month, even as the retailer develops operations outside China.

Giordano thus plans to introduce new store formats in China and develop products for women there, while setting up shop in markets with strong growth potential, such as South-east Asia and Saudi Arabia, and new markets Japan, South Africa and South America, he said.

This is not to say that expansion is not on the cards for its China market.

Giordano's group chief financial officer Dominic Irwin told BT that as the company builds up a stable, profitable portfolio and improves its brand position in China, a net decrease in the number of outlets may result - but only for the time being.

"This is a short-term outlook and as we roll out new, upgraded store formats with new marketing programmes, we expect to return to a growth trend in China," he said.

Giordano's territories are distinctly managed: Its corporate management is split among Hong Kong for Greater China, Singapore for South-east Asia and Dubai for the rest of the world, "so there is no competition for resources", he said.

With its megastore spanning three shop units opening in Suntec City Tower 5 in two months, Giordano will shut down its 1,000-sq-ft outlet there following Suntec City Mall's major renovations.

The megastore will offer apparel for men, women and children, but, as fond as Singaporeans are of their casual wear, they are still more of a challenge to Giordano than their peers in other Asian markets, said Mr Yeo.

He said: "It's because Singaporean shoppers are much more price-conscious than shoppers in other equally fashion-forward cities in Taiwan, Hong Kong and South Korea."

Source: Business Times, 30 May 2013