[PPT] - 2014 First Quarter Update 8 May 2014 Overview 1Q14 sales 9%; brand PowerPoint Presentation

SLIDE 1

2014 First Quarter Update

8 May 2014

SLIDE 2

8 May 2014 Giordano 2014 First Quarter Update 2



1Q14 sales ↓9%; brand sales ↓7%

 Continued weakening consumer demand in Greater China  Impact of weakening currencies in SEA  Economic headwinds on demand in SEA  Poor performance of women range



Gross margin ↓2.9 pp

 Price discounting to reduce inventory in slow selling categories  Impact of the devaluation of SEA currencies which has increased the costs of merchandise



Strong inventory control

66 days of costs, ↓16 days from year end. Total inventory including inventory at vendors and China franchisees ↓17% compared to last year end and 4% compared to same date last year



Reducing loss making stores

Store number ↓75 in 1Q, with 54 of these reductions in China



Operating cash flow remains strong

 Free cash flow from operations at same level as last year (192m in 1Q14 vs 196m in 1Q13)  Strong emphasis will continue to be placed on cash generation and returning surplus cash to shareholders through dividends

Overview

SLIDE 3

8 May 2014 Giordano 2014 First Quarter Update 3

Operations Highlights – Group

Sales down 9%, margin down 2.9pp, reflecting tough market condition; Strict control on inventory and store portfolio quality

[1] Global Brand Sales are total retail sales, at constant exchange rates, in self-operated (include e-shop) and franchised stores and stores operated by subsidiaries and associates/jointly controlled entities. [2] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated by subsidiaries and associates/jointly controlled entities in the prior period. [3] At the end of the period. [4] Inventory held at period end divided by cost of sales and multiplied by number of days in the period.

(In HK$ millions)

1Q14 1Q13 Variance Sales 1,380 1,514

9%

Gross profit 785 905

13%

Gross margin 56.9% 59.8%

2.9pp

Global brand sales [1] 1,813 1,942

7%

Comparable store sales [2]

6%
2%

Net cash and bank balances [3] 1,296 1,303

1%

Inventory days on costs (days) [4] 66 63 +3 Number of outlets [3] 2,567 2,624

57

SLIDE 4

8 May 2014 Giordano 2014 First Quarter Update 4

Sales Growth and Contribution by Region

Sales continued weakening in Greater China. Weakening currencies and economic headwinds affected sales in SEA. ME delivered 8% growth.

72 (5%) 83 (6%) 144 (9%) 155 (11%) 377 (25%) 320 (23%) 448 (30%) 402 (29%) 473 (31%) 420 (31%) 200 400 600 800 1,000 1,200 1,400 1,600

1Q13 1Q14

(HK$ millions) Mainland China Hong Kong & Taiwan Rest of Asia Pacific Middle East Wholesale sales to overseas & others

1,514 1,380

Mainland China 11% / 12%* Hong Kong & Taiwan 10% / 10%* Rest of Asia Pacific 15% / 6%* % to group sales in brackets * Sales growth excludes exchange effects Wholesale sales to overseas 15% Middle East 8% / 8%*

SLIDE 5

8 May 2014 Giordano 2014 First Quarter Update 5

Brand Sales Growth for the last 8 quarters

3% 0% 2%

1%
2%
1%
3%
7%

4% 0%

2%
1%
2%
2%
2%
2%
6%

5%

8%
6%
4%
2%

0% 2% 4% 6% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 (up to 4 May) Total Brand Sales Growth Comparable Store Sales Growth 1Q14 1Q13 Variance Global brand sales (HK$ millions) 1,813 1,942

7%

Comparable store sales growth

6%
2%

SLIDE 6

8 May 2014 Giordano 2014 First Quarter Update 6

Gross Profit Reconciliation

Rises in pricing offset cost increases but not enough to prevent margin dilution. Volume ↓12%

905 (59.8%) (58) (12) (109) (17) 767 785 (56.9%)

200 400 600 800 1,000 1,200 1Q13 Gross profit Increase in merchandise cost Currency depreciation loss on purchase Price increase Volume decrease Stock provision and exchange difference 1Q14 Gross profit (HK$ millions)

120m (13%)

10% 2% Average cost 12% Average price 6% Volume 12%

SLIDE 7

8 May 2014 Giordano 2014 First Quarter Update 7

Inventory and Turnover Days

Inventory remains at healthy level

427 518 436 63 82 66

10 20 30 40 50 60 70 80 90 100 200 300 400 500 600

Mar 2013 Dec 2013 Mar 2014

(Days) (HK$ millions) Inventory Turnover Days on Cost of Sales

(HK$ million) Mar 2013 Dec 2013 Mar 2014 Inventory balance held by the Group 427 518 436 Inventory held by franchisees in Mainland China 116 94 75 Finished goods at suppliers (not yet shipped) 8 27 18 Total system inventory 551 639 529

SLIDE 8

8 May 2014 Giordano 2014 First Quarter Update 8

Brand Sales Growth by quarter – Mainland China

3%
9%
6%
12%
13%
10%
13%
15%
2%
5%
8%
3%
7%
8%
5%
8%
10%

5%

20%
15%
10%
5%

0% 5% 10% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 (up to 4 May) Total Brand Sales Growth Comparable Store Sales Growth

SLIDE 9

8 May 2014 Giordano 2014 First Quarter Update 9

Performance Review by Region – Mainland China

Negative growth due to closure of shops and weak external demand

[1] Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates. [2] Sales Growth excludes exchange effect. [3] Total Brand Sales are total retail sales, at constant exchange rates, in self-operated stores (include e-shop) and franchised stores. [4] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated in the prior period. [5] At the end of the period. [6] 12 stores in Hangzhou switched from franchised stores to self-operated stores in 2H13. 1Q13 store number has been restated to include this change in order to have fairly comparable figures in the two periods.

(In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 420 473

11%/-12% [2]

Retail self-operated stores 310 347

11%

Wholesale sales to franchisees 110 126

13%

Total brand sales [3] 515 605

15%

Self-operated stores 310 357

13%

Franchised stores 205 248

17%

Comparable store sales [4]

10%
7%

Gross profit 215 258

17%

Gross margin 51.2% 54.5%

3.3pp

Number of outlets [5] 1,107 1,207

100

Self-operated stores 513 528 [6]

15

Franchised stores 594 679 [6]

85

SLIDE 10

8 May 2014 Giordano 2014 First Quarter Update 10

Gross Profit Reconciliation – Mainland China

Higher cost product mix offset by heavy discounting to clear excess inventories

258 (54.5%) (15) (1) (31) 4 215 (51.2%)

50 100 150 200 250 300

1Q13 Gross profit Cost increase Price decrease Volume decrease Stock provision and exchange difference 1Q14 Gross profit

(HK$ millions)

43m (17%)

Average cost 8% Average price 0% Volume 12%

SLIDE 11

8 May 2014 Giordano 2014 First Quarter Update 11

Turnaround the business and enhance the brand position Right merchandise at right place Fast marketing Store portfolio upgrade AD strategy

2014 Strategies – Mainland China

SLIDE 12

LUXURY PREMIUM VALUE BUDGET

2014 Strategies – Mainland China

Right merchandise at right place

1. Multi-brand strategies

M E N

SLIDE 13

2014 Strategies – Mainland China

Right merchandise at right place

2. Channel development

Channel Development Priority

Street stores

Very poor channel because of high rent  very low profitability/ loss making
Will exit loss making stores in FY14 and FY15

Shopping Malls

Supply > Demand  low footfall with a proliferation of local brands
High fixed rent
Proceed with caution  only open shops in malls anchored by international

brands and offer reasonable rent

E-strategy

Sales grew 15% in FY13, expects more growth in FY14
Eshop specific merchandise
Collaborate with Alibaba in “online to offline” (O2O) applications (e.g. click and

collect, TigerAnywhere (in-store terminal) x Alipay, store locator system, etc)

Department stores

Main focus for the main brand
On Unisex floor surrounded by local budget brands and sportswear brands  low

footfall, poor brand image and positions

Multi-branding

SLIDE 14

DEPARTMENT STORE

Unisex floor Men’s fashion Men’s fashion Women’s fashion Kids’ fashion Women’s fashion Shoes/Cosmetics

2014 Strategies – Mainland China

Right merchandise at right place

2. Channel development – Department store strategy

Giordano Men Eula Giordano Women Giordano Junior Liberation of Giordano brand by Beau Monde

(5 opened yet, plan 12 more within 1H)

Better products of Giordano Women Strong product range of Giordano Junior New brand – Eula Move away from the unisex floor to better floors in department stores

SLIDE 15

SLIDE 16

SLIDE 17



Proposition: modern-contemporary, stylish Italian inspired down-to-earth designs in affordable prices



Market positioning:  Target customers: New women of modern metropolis China. New middle class – Generation 2, born after mid-80s, aged 28-35, confident, independent, expressive  Distribution channels: A to B+ grade department stores/shopping malls collocate with international brands  Product category: inspired by Italian art (futurism), lifestyle, fashion and style icons and translated to warm, outgoing, stylish and down-to-earth design  all seasons design elements: roses, dots and stripes; warm color (black, red, white, grey)

SLIDE 18

2014 Strategies – Mainland China

Fast Marketing

1Q14 Fast marketing campaign Coming fast marketing campaigns…

SLIDE 19

1. Reduce loss making shops and improve profitability
2. Shop development strategy

2014 Strategies – Mainland China

Store portfolio upgrade

Change to Beau Monde
Change to outlet
Loss making Close

Damaging Giordano brand

More than 50% of our shops
Increase number of shops
Renovation upgrade
Department store strategy

Core locations

Image stores (Giordano Ladies, BSX)

Image stores

Store Development Priority

Shop classification

SLIDE 20

SLIDE 21

2014 Strategies – Mainland China

Store portfolio upgrade

“Concepts”



Idea came from mini department store



Each brand has its own renovation elements to highlight its brand image



Elements of mini department store:  Zoning (Giordano Men, Women, Junior, BSX, BM)  Corridor  Different color signature and renovation  Variety of choice



First “Concepts” was opened on Guangzhou Beijing Road in late April

SLIDE 22

1. Speed up consolidating ADs 2. Develop super ADs



Be the business partner/consultant of AD  Invest in teams to support merchandizing  Focus on Top 10 ADs (48% of total AD stores)  Redirect subsidies to investment subsidies i.e. marketing and renovation  Support AD gross margin (1Q up 2.5pp)

2014 Strategies – Mainland China

AD strategy

SLIDE 23

8 May 2014 Giordano 2014 First Quarter Update 23

Brand Sales Growth by quarter – Hong Kong

6%

5%

8% 4% 0% 0% 2%

8%

5% 16% 8% 7% 3% 1% 0% 2%

7%

3%

10%
5%

0% 5% 10% 15% 20% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 Total Brand Sales Growth Comparable Store Sales Growth

SLIDE 24

8 May 2014 Giordano 2014 First Quarter Update 24 (In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 239 261

8%

Comparable store sales [2]

7%

+3% Gross profit 159 172

8%

Gross margin 66.5% 65.9% +0.6pp Number of outlets [3] 84 84 

[1] Total Sales are total retail sales translated at average exchange rates. [2] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. [3] At the end of the period.

Performance Review by Region – Hong Kong

Intense competition and adverse weather in CNY weakening 1Q sales

SLIDE 25

2014 Strategies – Hong Kong

1. Shop portfolio:



No shop expansion except MTR shops



Extend shop area for Giordano Junior



Open a mini department store in Macau in May

2. Fast marketing:



Continuous fast marketing campaigns  Aberdeen collection by Giordano (“ACBG”) in April  Giordano x Lowe Alpine

8 May 2014 Giordano 2014 First Quarter Update 25

SLIDE 26

SLIDE 27

SLIDE 28

8 May 2014 Giordano 2014 First Quarter Update 28

Brand Sales Growth by quarter – Taiwan

9%
9%
12%
15%

4%

7%
3%
11%

12%

15%
14%
16%
14%

6%

3%

1%

10%

15%

20%
15%
10%
5%

0% 5% 10% 15% 20% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 Total Brand Sales Growth Comparable Store Sales Growth

SLIDE 29

8 May 2014 Giordano 2014 First Quarter Update 29 (In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 163 187

13% / -11% [2]

Comparable store sales [3]

10%
14%

Gross profit 94 114

18%

Gross margin 57.7% 61.0%

3.3pp

Number of outlets [4] 199 209

10

[1] Total Sales are total retail sales translated at average exchange rates. [2] Sales growth excludes exchange effect. [3] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. [4] At the end of the period.

Performance Review by Region – Taiwan

1Q sales depressed by weak market conditions but seeing recovery in 2Q after launch of localized products

SLIDE 30

2014 Strategies – Taiwan

1. Products



Going back to basic, e.g. Polo



Innovative products, e.g. G-Cool+ products using high technology fiber

2. Shop renovation



Target >15 stores to be renovated

3. Fast marketing



Continue brand differentiation by executing cross-over marketing campaigns and developing local products

8 May 2014 Giordano 2014 First Quarter Update 30

SLIDE 31

H E L LO TAIWAN

Related products: Polo

SLIDE 32

8 May 2014 Giordano 2014 First Quarter Update 32

Gross Profit Reconciliation – Hong Kong and Taiwan

Strong product mix but volume declined due to weak market demand

286 (63.8%) (19) 42 (54) (2) 253 (62.9%)

50 100 150 200 250 300 350

1Q13 Gross profit Cost increase Price increase Volume decrease Stock provision and exchange difference 1Q14 Gross profit

(HK$ millions)

33m (12%)

Average cost 15% Average price 12% Volume 19%

SLIDE 33

8 May 2014 Giordano 2014 First Quarter Update 33

Brand Sales Growth by quarter – Rest of Asia Pacific

6% 10% 14% 13% 4% 6% 1%

10%

1% 1% 3% 8% 8% 3% 3% 0%

12%
5%
15%
10%
5%

0% 5% 10% 15% 20% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 Total Brand Sales Growth Comparable Store Sales Growth

SMIT: SG -18% ID -1% MY -7% TH -2% SMIT: SG -17% ID -9% MY -8% TH -10% SMIT: SG -10% ID +12% MY -8% TH +11% SMIT: SG -9% ID -1% MY -9% TH +1%

SLIDE 34

8 May 2014 Giordano 2014 First Quarter Update 34 (In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 320 377

15% / -5% [2]

Comparable store sales [3]

12%

+8% Gross profit 198 247

20%

Gross margin 61.9% 65.5%

3.6pp

Number of outlets [4] 541 489 +52

[1] Total Sales are total retail sales translated at average exchange rates. [2] Sales growth excludes exchange effect. [3] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. [4] At the end of the period.

Performance Review by Region – Rest of Asia Pacific

Sales depressed by severe currency decline and weak household spending and consumer demand in SEA

SLIDE 35

8 May 2014 Giordano 2014 First Quarter Update 35

Gross Profit Reconciliation – Rest of Asia Pacific

Cost increases recovered by price increases but not sufficient to preserve overall margin decline

247 (65.5%) (9) (13) 27 (32) (22) 198 (61.9%)

50 100 150 200 250 300 1Q13 Gross profit Increase in merchandise cost Cost increase due to local currency depreciation Price increase Volume decrease Exchange difference 1Q14 Gross profit (HK$ millions)

49m (20%)

Average price 8% Volume 13% 8% 12% Average cost 20%

SLIDE 36

2014 Strategies – Singapore

8 May 2014 Giordano 2014 First Quarter Update 36

1. A team from the Group is assisting to re-shape Singapore

perations

2. Products



Overbought the wrong category in 1Q, now focus on core shirts and shorts



Inventory reduction progress on track

4. Shop renovation



Target 35% of stores to be renovated

3. Fast marketing

SLIDE 37

2014 Strategies – Indonesia, Malaysia, Thailand

8 May 2014 Giordano 2014 First Quarter Update 37

1. Market slowdown in retail sector in these economies 2. Products



Identify merchandise drivers and local fast marketing campaigns to grow sales

3. Shop expansion



Continuous expansion in each country

4. Fast marketing



Shared campaigns:



Market-specific campaigns:

Indonesian Young Illustrator ‘HAHAN’

Indonesia Malaysia Thailand

SLIDE 38

8 May 2014 Giordano 2014 First Quarter Update 38

Brand Sales Growth by quarter – Middle East

8% 1% 1%

1%

1%

1%

3% 10% 3% 6%

2%
4%
6%
1%
7%

0% 4%

2%
8%
6%
4%
2%

0% 2% 4% 6% 8% 10% 12% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2QTD14 Total Brand Sales Growth Comparable Store Sales Growth

KSA +12% UAE +11% OTH -6% KSA +2% UAE +9% OTH -6% KSA +3% UAE +9% OTH -11% KSA -6% UAE +7% OTH -13%

SLIDE 39

8 May 2014 Giordano 2014 First Quarter Update 39

Performance Review by Region – Middle East

Growth momentum continued from last quarter

[1] Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates. [2] Sales growth excludes exchange effect. [3] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. [4] At the end of the period.

(In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 155 144 +8% / +8% [2] Comparable store sales [3] +4%

6%

Gross profit 94 88 +7% Gross margin 60.6% 61.1%

0.5pp

Number of outlets [4] 195 187 +8

SLIDE 40

8 May 2014 Giordano 2014 First Quarter Update 40

Gross Profit Reconciliation – Middle East

Increase in prices offset cost increases due to changes in product mix

88 (61.1%) (6) 14 (5) 3 94 (60.6%)

20 40 60 80 100 120

1Q13 Gross profit Cost increase Price increase Volume decrease Stock provision 1Q14 Gross profit

(HK$ millions)

+6m (7%)

Average cost 9% Average price 10% Volume 2%

SLIDE 41

2014 Strategies – Middle East

1. Shop expansion



Target 5% increase in store number mainly in UAE and Saudi Arabia

2. More Engagement with social media



Planned PR exercise: media round table



Much aggressive focus on digital and social media



Radio and press advertisement to promote new lion polo and country polo

SLIDE 42

8 May 2014 Giordano 2014 First Quarter Update 42 (In HK$ millions)

1Q14 1Q13 Variance Total sales [1] 396 369 +7% / +5% [2] Comparable store sales [3] +4% +4% Gross profit 214 209 +2% Gross margin 54.0% 56.6%

2.6pp

Number of outlets [4] 236 260

24

Jointly Controlled Company – South Korea

[1] Total Sales are total retail sales translated at average exchange rates. [2] Sales growth excludes exchange effect. [3] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores that have been opened/operated in the prior period. [4] At the end of the period.

SLIDE 43

8 May 2014 Giordano 2014 First Quarter Update 43

ACTIONS

 Continuous control on inventory  Tightened on cost headcount freeze and postpone salary review  Closure of unprofitable and brand damaging shops in China

 Roll out Beau Monde budget brand.  Store expansion in SEA

 Reshape merchandise more generous fitting and simplicity in design,

new team for women

SLIDE 44

8 May 2014 Giordano 2014 First Quarter Update 44

Outlook



1Q14 sales & GP margin declined, profitability is significantly lower vs 1Q13



2QTD14 healthier merchandise portfolio in store, sales are strengthening. Expect the drop in profitability will be narrowed in the second quarter of the year.



Impact of currency depreciation in Asia and rent increases in HK will be less in 2H vs 1H.



Aligning shop locations, store design, merchandise & brand image, China is now underway but profit enhancement will take time to materialize.



Shop penetration will continue, including Malaysia, Thailand, IndoChina.



Overall outlook of 2H is uncertain with volatility of external economic factors in different markets.



Cash generation remains our priority.

SLIDE 45

Q&A

8 May 2014 Giordano 2014 First Quarter Update 45

SLIDE 46

8 May 2014 Giordano 2014 First Quarter Update 46

Total sales[1] Comparable store sales[2]

(HK$ millions)

1Q14 1Q13 Variance 1Q14 1Q13 Mainland China 420 473

11%
10%
7%

Hong Kong 239 261

8%
7%

+3% Taiwan 163 187

13%
10%
14%

Singapore 85 106

20%
17%
1%

Indonesia 96 103

7%
9%

+21% Malaysia 58 65

11%
8%

+6% Thailand 51 57

11%
10%

+22% Australia 25 39

36%
20%
6%

India 5 7

29%

Flat +19% UAE 62 55 +13% +9%

10%

Saudi Arabia 79 71 +11% +2%

4%

Other Middle East regions 14 18

22%
6%
2%

Retail & Distribution total 1,297 1,442

10%
9%
3%

Wholesale sales to overseas franchisees 83 72 +15% +3% +4% Group total 1,380 1,514

9%
6%
2%

[1] Total Sales are total retail sales in self-operated stores and total wholesale sales to franchisees, translated at average exchange rates. [2] Comparable Store Sales are total brand sales, at constant exchange rates, from existing stores and e-shop that have been opened/operated in the prior period.

Summary of Total Sales and Comparable Store Sales Growth by Market

SLIDE 47

8 May 2014 Giordano 2014 First Quarter Update 47

Number of outlets As at 31 March 2014 As at Dec-13 Change Giordano & Junior Giordano Ladies BSX Others Total Mainland China 1,054 26 27  1,107 1,161

54

Hong Kong & Macau 53 13 18  84 88

4

Taiwan 170 14 15  199 201

2

Singapore 44 4   48 52

4

Indonesia 147 5  29 181 179 +2 Malaysia 88    88 87 +1 Thailand 131 7   138 133 +5 Australia 28    28 32

4

India 58    58 65

7

UAE 42    42 44

2

Saudi Arabia 92  7  99 99  South Korea 208  28  236 244

8

Other markets 241 2 16  259 257 +2 Group total 2,356 71 111 29 2,567 2,642

75

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