Sogo operator back in the black with $220m profit

Lifestyle International (1212), the operator of Sogo shopping malls, returned to profit in the first half of 2021 as the Covid-19 pandemic stabilized and shoppers returned to its stores.

The department store operator posted an interim net profit of HK$220 million yesterday, compared with a loss of HK$226.9 million a year ago.

The recovery was due to rising sales proceeds, a lower mark-to-market fair value loss and additional net rental income from its newly acquired London-based commercial property, Lifestyle International said. The company did not declare an interim dividend. Earnings per share were 14.6 HK cents.

Lifestyle International maintains a cautious view on Hong Kong's retail sector in the second half, as the city's economic recovery has been uneven and its overall economic activity remains below pre-pandemic levels, it said.

The consumption voucher scheme and further easing of restriction measures with higher vaccination rates will stimulate local consumption, but a lack of inbound tourism and any resurgence in coronavirus infections could derail the nascent recovery. The tepid job market could also undermine consumer sentiment, the company added.

Lifestyle International's revenue rose by 12.8 percent to HK$1.06 billion for the first half of this year. But its gross profit margin fell 1.4 percentage points to 73.3 percent, as the growth in direct sales was higher than the increase in concessionaire commission.

Total gross sales proceeds rose 8 percent to HK$2.84 billion due to an improvement in customer foot traffic at the stores.

Sales at Sogo Causeway Bay rose 8.2 percent as compared to a decline of 49.3 percent a year ago. Overall traffic footfall grew 3.3 percent. In the same building, the company's Japanese restaurant, Wa San Mai, saw a 25.6 percent increase in business receipts to HK$27.9 million.

Meanwhile, Sogo Tsim Sha Tsui saw a 6.8 percent increase in sales, compared with a 71.1 percent plunge a year ago.

Lifestyle International's London-based commercial property, which was acquired in November 2020, contributed a gross rental income of HK$60 million during the period.

Lifestyle International is developing a commercial building in Kai Tak which will stretch 101,000 square meters for a new Sogo department store and other entertaining and dining facilities.

Construction work at the Kai Tak project have been progressing smoothly as scheduled, and is expected to launch in 2023.

Shares of Lifestyle International closed 2.89 percent higher at HK$5.7 yesterday.