Daphne'S Losses Increased By 8% In 2019.

In March 27th, Daphne International Holdings Ltd (Daphne) released its 2019 annual performance bulletin, which showed that the Group recorded a loss of HK $1 billion 19 million 500 thousand in 2019, compared with HK $786 million 600 thousand in 2018. The loss attributable to shareholders of the group in 2019 was HK $1 billion 70 million 100 thousand (2018: HK $994 million 400 thousand).

As of December 31, 2019, Daphne's operating income reached HK $2 billion 126 million 400 thousand during the reporting period, down 48.5% from the same period last year, and the share loss of shareholders increased by 8% to HK $1 billion 70 million, and gross profit margin reached HK $781 million 100 thousand, down 13.2% to 36.7% over the previous year.

For losses, Daphne said it was mainly due to the sharp decline in the number of stores from 2820 in December 31, 2018 to 425 in December 31, 2019, and the core brand business was not ideal.

Sales of Daphne's core brand business decreased by 50% from 3 billion 798 million 800 thousand Hong Kong dollars in 2018 to HK $1 billion 882 million 900 thousand, due to a sharp reduction in sales and year-on-year sales decline. Daphne's core brand business in 2019 accounted for 82% of the total turnover of the group and 86% in 2018. The total revenue from other brand businesses decreased by 33% to HK $388 million 800 thousand, due to closing stores during the year. The division recorded a loss of HK $48 million 700 thousand, compared with HK $26 million 700 thousand last year.

Daphne has made a lot of decisions to close down stores for its performance losses, so as to reduce the output of operating costs. According to statistics, Daphne closed 2395 sales outlets in 2019. As of December 31, 2019, the group had 425 sales outlets, including 360 sales outlets for core brand businesses and 65 sales outlets for other brand businesses.

At the same time, in order to cope with the increasingly serious business environment and rising cost pressures, Daphne accelerated the pace of structural adjustment and opened the "light assets" business mode. In order to cooperate with the business transformation, Daphne has intensified efforts to clean up the over season stocks. The inventory level dropped by 84% from HK $992 million 300 thousand in December 31, 2018 to HK $162 million in December 31, 2019. The average stock rotation days decreased significantly by 41 days to 157 days in 2018, and 198 days in 2018.

In addition, Daphne has shifted most of its direct stores to the "partnership system", aiming at a small number of new image shops directly operated by the group, and actively promoting its layout in the shopping center to cater to the current shopping habits of young consumers and to convey young and timely brand image to the outside world. This will not only help alleviate the negative leverage effect caused by high fixed costs, but also help the group explore a road of sustainable development in the throes of structural adjustment.

In 2019, Daphne integrated resources and intensified efforts to develop e-commerce business. Daphne customized the flexible supply chain management system according to the characteristics of the electricity supplier operation. Through the "small single quick reverse" mode, respond quickly to changing consumer habits, respond quickly to seize business opportunities in the rapidly changing online market. In 2019, Daphne also catered to online consumer preferences and launched "net red explosion" from time to time. These products were warmly reacted by online consumers, and their contribution to the group's total turnover continued to improve and remained profitable. In addition, Daphne continues to strengthen its cooperation with emerging e-commerce and social networking platforms to attract more young consumers. In addition to maintaining close cooperation with key online platforms, it further expands strategic cooperation with online distributors to expand the business layout of the online market.