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Public company info - I.T Ltd. , 00999.HK
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I.T Ltd., 00999.HK - Company Profile
Chairman Sham Kar Wai
Share Issued (share) 1,196,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Apparel
Corporate Profile Business Summary: The Group is principally engaged in the sales of fashion wears and accessories. Performance for the year: Total turnover of the Group decreased by 12.6% to HK$7,719.4 million. Basic loss per share of 62.5 HK cents (FY18/19: Basic earnings per share of 37.0 HK cents). Business Review (a) The Group The business environment in which the Group operated was extremely challenging during the year ended 29 February 2020 (FY19/20). With social instability in Hong Kong intensifying over the second half of the financial year along with a slowdown in global economic growth and a mounting Sino-US trade dispute, the Group’s business in many of The Group’s operating regions suffered a severe blow. The outbreak of COVID-19 in January 2020 onwards further aggravated an already difficult operational environment. Inbound tourism and spending enthusiasm in several of the Group’s principal operating markets such as Hong Kong and Mainland China experienced a sharp decline. The Group responded by focusing on innovation and by increasing promotional and discount related activities to boost sales volume. At the same time, The Group undertook a comprehensive review of The Group’s shop portfolio, renegotiating or exiting certain loss-making retail locations. The Group focused on cost saving and adjusting The Group’s buying levels. The Group also re-prioritised The Group’s work plans with the objective of strengthening The Group’s liquidity position. However, the savings from these measures were not sufficient to offset the adverse impact caused by the decline in sales and gross margin – and hence the Group’s profitability. Consequently, The Group’s second-half results – traditionally stronger than first-half results due to seasonality – fell far below The Group’s expectations. Turnover of the Group declined by 12.6% over last year to HK$7,719.4 million. Gross margin also decreased, which was principally due to the extra discount activities that The Group offered during the financial year. The Group recorded a net loss of HK$745.8 million for the year ended 29 February 2020 compared to a net profit of HK$444.1 million for the year ended 28 February 2019. The Group is required to assess its non-financial assets for impairment if events indicate the carrying value of the assets may not be recovered. During the year ended 29 February 2020, The Group conducted impairment assessments to non-financial assets with impairment indicators and result in a non-cash impairment on non-financial assets of HK$613.4 million in FY19/20. If the above non-cash items were excluded, net loss of the Group would have been HK$132.4 million. Turnover by Market For the year ended 29 February 2020, turnover in The Group’s Hong Kong and Macau segment decreased by 23.5% to HK$2,620.2 million while it contributed 33.9% towards the Group’s total turnover (FY18/19: 38.8%). The decline was attributable to a reduction in the store distribution network in Hong Kong and negative comparable-store-sales-growth as a result of multiple factors including social instability and the outbreak of COVID-19. Turnover of The Group’s Mainland China operations decreased by 9.0% to HK$3,751.4 million which contributed 48.6% towards the Group’s total turnover (FY18/19: 46.7%). The Group’s sales declined substantially in January and February 2020 in a market environment defined by temporary store closures and travel restrictions in several cities of the country due to the outbreak of the COVID-19. The Group is especially gratified by the performance of The Group’s Japan and the USA operations where turnover in this segment increased by 4.9% to HK$1,209.2 million amidst a challenging operational environment. Sales in this segment contributed 15.7% of the Group’s total turnover (FY18/19: 13.0%). The Group’s unique brand collections in these regions, namely A Bathing Ape and its subsidiary lines, have proven to be resilient in an economic environment disrupted by several negative macroeconomic factors. Brand Mix The Group’s strength and resilience derives from The Group’s consistent efforts to diversify the Group’s business across geographies and to define the optimal mix across different fashion concepts. The Group are delighted by the new brands The Group introduced during the financial year and The Group believe that these additions have further enhanced and diversified The Group’s already comprehensive brand portfolio. For the year ended 29 February 2020, The Group’s in-house brands segment continued to provide us with the largest revenue contribution, amounting to 60.0% (FY18/19: 60.5%). Margin and Cost Dynamics Multiple macro factors, such as the Sino-US trade dispute, regional social events and the outbreak of the COVID-19 in the beginning of 2020, placed significant downward pressure on the retail environment and consumer sentiment in many of The Group’s operating regions. Although The Group’s initial strategy was to focus on full-price sales and reduce discount-driven promotions in order to secure gross margin, The Group eventually had to increase mark-downs to boost sales volume amidst an incredibly difficult trading environment. The Group recorded a reduction in turnover of 12.6%, with gross profit also decreasing by 16.1% and gross margin decreasing by 2.6 percentage points to 61.3% as compared to the previous year. Total operating costs as a percentage of sales increased to 63.5% (FY18/19: 55.8%). This was predominately due to the impact of the sales decline and the non-cash impairment provision. If the impact of non-cash impairment provision was excluded, total operating costs as a percentage of sales would have been 58.6%. The Group recorded operating loss amounted to HK$380.1 million, with the decrease being principally due to the pressure from gross profit decline and the non-cash impairment provision. If the impact of non-cash impairment provision was excluded, operating profit of HK$233.3 million would have been recorded for the Group. (b) Hong Kong and Macau The results of the Group’s Hong Kong and Macau operations for the second half of FY19/20 were overall a continuation of the negative development seen in the first half of the financial year. With social instability in Hong Kong intensifying over the second half of the financial year, along with a slowdown in global economic growth and persistent trade tensions between China and the USA, the fashion retail landscape in these regions was adversely impacted. The outbreak of the COVID-19 since January 2020 has caused a global health emergency and disruption to travel worldwide, further impacting inbound tourism in The Group’s Hong Kong and Macau regions. The Group has implemented multiple measures to control The Group’s costs in response to the difficult trading environment. These measures have included a comprehensive review of The Group’s retail store portfolio, which has seen us renegotiate and exit certain loss-making retail locations while selectively opening new ones. The Group recorded a net closure of 28 stores in The Group’s Hong Kong and Macau segment for the year that ended on 29 February 2020. Savings were also achieved in other costs’ lines such as staff costs and marketing expenses. Turnover in The Group’s Hong Kong and Macau segment decreased by 23.5% over the previous year to HK$2,620.2 million. Retail sales also decreased by 23.3% to HK$2,580.2 million. Comparable-store-sales-growth registered at -23.2% (FY18/19: 2.4%). Gross margin decreased to 57.7% (FY18/19: 62.5%). This decline in gross margin was a result of multiple factors, but it was primarily the result of an increase in discount related activities amidst the difficult business environment. Consequently, an operating loss of HK$671.7 million was recorded for The Group’s Hong Kong and Macau segment for the year ended on 29 February 2020 (FY18/19: operating profit of HK$12.6 million). If the impact of non-cash impairment provision was excluded, an operating loss of HK$428.1 million would have been recorded for The Group’s Hong Kong and Macau segment. (c) Mainland China After a promising start to the financial year for The Group’s Mainland China business, the Group experienced a very contrasting second half of FY19/20, reflecting the uncertain macroeconomic environment and a slowdown in global economic growth. The Group registered a sharply deteriorating situation in January and February of 2020 due to the temporary closure of stores across multiple cities in Mainland China as a result of the outbreak of COVID-19. In response, The Group paid extra attention to cost management and agility and were very selective in investment, notably in store network expansion. As a result, The Group made a net addition of only five stores during the financial year. Nevertheless, The Group remain positive about the future development prospects in this country since The Group see good dynamics and potential rewards, particularly for players with quality and innovative products. Turnover attributable to The Group’s Mainland China region decreased by 9.0% to HK$3,751.4 million. Total retail sales decreased by 9.4% to HK$3,700.1 million, with comparable-store-sales-growth registering -5.3% (FY18/19: 1.7%). Gross margin decreased by 2.0 percentage points to 60.1%, principally due to the extra discount-related promotions that The Group offered during the financial year with the objective of boosting sales volume. Consequently, an operating loss amounting to HK$236.4 million was recorded for The Group’s Mainland China segment (FY18/19: operating profit of HK$229.1 million). If the impact of non-cash impairment provision was excluded, operating profit of The Group’s Mainland China segment would have been HK$133.4 million. (d) Japan and the USA The Group added a total of four “A Bathing Ape” and “AAPE” stores across Tokyo and Osaka, Japan and Miami, the USA during the financial year and The Group are delighted that these new stores are very well received. The Group are also excited by the prospect of extending the reach of these brands, both online and offline, in other strategic markets that are showing growth momentum. There is always more to look forward to in the development of The Group’s A Bathing Ape brand. The Group’s ambitious plans include new fashion concepts and product lines, and fresh and innovative collaborations with more renowned fashion names and business units around the world. The Group is gratified by The Group’s performance in Japan and the USA, with the segment registering another year of resilient underlying growth in a challenging operational environment and after many consecutive years of impressive business results. Sales in this segment increased by 4.9% to HK$1,209.2 million while gross margin decreased to 70.0% (FY18/19: 71.2%). Operating profit increased by 1.7% to HK$482.9 million. Prospects: It is difficult for the Group to precisely evaluate the actual impact of the COVID-19 pandemic on the Group’s business performance in 2020, but The Group expect The Group’s business will continue to face strong headwinds in the period ahead. Although the Group’s sales in Mainland China have gradually started to recover since March 2020 as the situation in the country gradually improves, The Group’s cost control work is continuing, potentially at an even faster pace and in all parts of the Group. In the meantime, The Group are striving to achieve the highest precautionary standards to protect the health and safety of staff, customers and business partners. The Group will closely monitor the market situation in order to adjust The Group’s business strategies accordingly.

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