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Global Brands Group to sell loss-making kids business in China

By Prachi Singh

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Business

For the six months ended September 30, 2018, Global Brands Group’s revenue on a like-for-like basis, excluding the impact of the divestment of select North American businesses, decreased by 4.1 percent to 699 million dollars, compared to the same period last year, which the company said is mainly due to a decrease in China Kids and Home business. The group completed divestment of North American licensing business in October and has now decided to sell the loss-making kids business in China.

Commenting on the way ahead, Rick Darling, the company’s Chief Executive Officer said in a statement: “The divestments we have made have significantly reduced our working capital requirements and improved our balance sheet. We are also in the midst of implementing a substantial restructuring program to reduce operating expenses and improve efficiencies. Going forward, we will build on the strengths of our portfolio of brands, and expand our global brand management business, particularly in Asia.”

Global Brands Group completes divestment of North American business

The company also announced that strategic divestment, which involved select North American licensing businesses, closed on October 29, 2018 and the estimated purchase price of 1.2 billion dollars in cash was received. The group will announce the amount of cash dividend as soon as the final purchase price has been determined, which is estimated to be about 28 Hong Kong cents per share.

At the same time, in line with its broader strategy of focusing on its core business, Global Brands also added that the group has agreed to sell its loss-making kids business in China to the controlling shareholders for a cash consideration of 20 million dollars, representing the net tangible asset value of the business as at September 30, 2018.

“We are now a financially stronger and more nimble organization able to adapt to a rapidly changing environment. Despite significant levels of disruption, both from an industry and a macroeconomic perspective, we are well-positioned to focus on growing our core businesses and take advantage of the opportunities ahead,” added Dr. William Fung, Chairman of Global Brands Group Holding Limited.

Highlights of Global Brands’ Group’s H1 results

Total margin for the six months decreased by 18.1 percent to 187 million dollars, representing 26.8 percent of revenue compared to 31.4 percent in the same period of the previous year. The Group also recorded an operating loss from its continuing operations of 159 million dollars.

During the reporting period, revenue from men’s and women’s fashion increased by 1.8 percent to 265 million dollars but total margin decreased by 22.2 percent to 81 million dollars primarily driven by certain women’s brands businesses as a result of higher royalties paid, as well as higher discounting in some of the brands. The company said, decrease was partially offset by Spyder with its total margin increasing by 37 percent primarily driven by sales in Korea. During the reporting period, men’s and women’s fashion recorded an operating loss of 33 million dollars.

Revenue from footwear and accessories, the company added, decreased by 4.5 percent to 270 million dollars due to the sale of the home business during last financial year, partially offset by higher revenue in the European footwear and accessories businesses. Total margin decreased by 17.3 percent to 57 million dollars while operating loss of was 44 million dollars.

During the reporting period, revenue from kids decreased by 11.9 percent to 142 million dollars as compared to the same period last year, while total margin decreased by 12.5 percent to 27 million dollars due to lower sales in China and Europe amid challenging retail environment. The segment recorded an operating loss of 97 million dollars.

The company further said that revenue from Brand Management, decreased by 9.7 percent to 22 million dollars and total margin decreased by 9.9 percent to 22 million dollars. During the Reporting Period, Brand Management recorded an operating profit of 16 million dollars compared to 4 million dollars in the same period last year. The geographic split of the group’s revenue was 56 percent Americas, 34 percent Europe and 10 percent Asia.

Picture:Facebook/Spyder Active Sports

Global Brands Group