Sa Sa International Holdings Ltd, Hong Kong's biggest cosmetics retailer, said first-half net profit rose 25.7 percent driven by increases of same-day in-town mainland tourists, who spent more on cosmetics and other daily necessities.

Profit for the six months ended Sept 30, 2012 was HK$282.1 million ($36.39 million), up from HK$224.3 percent during the same period last year, Sa Sa told the Hong Kong stock exchange on Thursday. Turnover in the first half rose 21.2 percent to HK$3.38 billion, according to the group.

 

The Hong Kong-based cosmetics retailer, which has opened cosmetics stores throughout major mainland cities as well as in Singapore and Malaysia, generated about 77.9 percent of the group's turnover from its 94 shops in Hong Kong and Macao during the six months.

Although contribution from local stores was slightly down from the 79.1 percent registered last year, the group still benefited from the steady growth of inbound mainland tourists to the city, particularly the structural changes in tourist mix, said Sa Sa's Chairman Simon Kwok.

Data from Hong Kong Tourism Board showed that 56.2 percent of total mainland tourist arrivals to the city in the first nine months of 2012 are "same-day in-town tourists" who do not stay overnight in Hong Kong, significantly outpacing, for the first time, those visitors that spend nights in the city.

As tourists who stay in-town tend to spend more money on cosmetics and other kinds of daily necessities, same-store sales of Sa Sa in the first half rose 16.8 percent, while the average sales value per mainland tourists also expanded by 10.7 percent over the same period last year.

Sa Sa opened 15 new stores and closed eight stores in Hong Kong and Macao between April and Sept, bringing the total number of shops to 94. The group aims to open its 100th store by the end of March, 2013, according to Kwok.

Although Sa Sa outperformed the overall market retail sales in the city which has seen sluggish growth in the past few months, the performance of the cosmetics retailer has also been dragged down by the heating retail rents in the city.

During the first six months, Sa Sa renewed leases for 15 existing stores in Hong Kong. Average rents for these stores surged 37 percent over the previous contracts signed three years ago, according to group.

Despite Sa Sa's mainland stores continuously losing money, reporting a loss of 17 million yuan ($2.73 million) in the first six months compared with the 16.1 million yuan loss registered for the same period last year, the group's expansion on the mainland will not be affected, according to Kwok, who added that it is such a huge market that it is worth investing.

Sa Sa plans to open another nine stores in the second half of the year to make a total of 62 on the mainland by the end of March in 2013. The number of stores in Taiwan, Singapore and Malaysia are also expected to reach 30, 21 and 51 from the current 27, 20, and 49, respectively, according to the group.

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