Hong Kong – May 29, 2007

First quarter’s turnover increased 15.3 percent compared with the same period last year.  Mainland China recorded the best performance among the Group’s main markets, with first quarter sales up 29.4 percent and comparable store sales up 22.1 percent on a year-on-year basis.  Meanwhile, Hong Kong, Taiwan and Singapore posted sales gains of 4.0 percent, 1.6 percent and 1.1 percent respectively.  Among our brands, Giordano Ladies posted the best performance, achieving a 24.8 percent sales gain, followed by Giordano which saw turnover increasing by 15.2 percent year-on-year.  Gross margin for first quarter 2007 came in lower at 46.1 percent due to more aggressive stock clearances.  The Group added 26 outlets in the first quarter, with 12 in Mainland China, bringing the company’s global network to 1,793 outlets.

“During the first quarter, we concentrated on strengthening the various Giordano brands and growing our business in Mainland China.  Twelve of the 26 outlets added worldwide during the quarter were in Mainland China, including the first Giordano Concepts store in Shanghai.  Our efforts were rewarded with first quarter 2007 turnover growing by 15 percent year-on-year.    We are especially heartened by the 29 percent sales gain we achieved in Mainland China.  So far second quarter 2007 top line performance has stayed on course,” remarked Peter Lau, Chairman and Chief Executive of Giordano International Limited.  “However, a warm Chinese New Year sales period obliged us to take deeper discounts than anticipated, while high rental and staff costs caused operating costs to rise at a pace similar to that seen in second half 2006,” Mr Lau continued. 

“We will continue to follow through on our growth plan.  In China, we expect to add about 20 outlets in the second quarter, putting us well on track to achieve our target of adding 50 stores in China and 120 outlets worldwide in 2007.  We will also continue with the roll-out of Giordano Concepts in the region, with additional stores planned for Shanghai, Guangzhou, Singapore, Kuala Lumpur and Bangkok during the second half of 2007.  We opened our first re-branded Bluestar Exchange / BSX store in Hong Kong at the end of March and have since converted three more, and initial customer reception has been positive.  These and other brand building efforts will help us lay the groundwork for continued growth and expansion,” Mr Lau added.

Sales Performance by Business Segment

Turnover at both the Retail & Distribution and the Garment Trading & Manufacturing divisions saw good growth in the first quarter.  On a year-on-year basis, Retail & Distribution sales increased by 13.4 percent and Garment Trading & Manufacturing sales to external customers increased by 34.9 percent, producing an overall turnover increase of 15.3 percent for the Group in the first quarter.  

Retail & Distribution Division - Sales Performance by Brand

Giordano Ladies continued to perform strongly in the first quarter, with sales up 24.8 percent and comparable store sales up 17.5 percent year-on-year.  Meanwhile, Giordano sales and comparable store sales grew by 15.2 percent and 6.3 percent respectively.  However, performance of Bluestar Exchange continued to lag, with sales decreasing by 11.1 percent compared to first quarter 2006.  We launched our Bluestar Exchange re-branding program in the first quarter, with the first BSX store opening in Hong Kong at the end of March and initial customer response has been positive.  Overall, sales and comparable store sales of the Retail & Distribution Division for the quarter ended March 2007 increased 13.4 percent and 5.8 percent year-on-year respectively.

Retail & Distribution Division - Sales Performance by Market

Mainland China posted the best performance with sales up 29.4 percent and comparable store sales up 22.1 percent on a year-on-year basis.  Hong Kong, Taiwan and Singapore saw sales growing by 4.0 percent, 1.6 percent and 1.1 percent respectively compared to first quarter 2006. 

Margins, Inventory and Cash

First quarter 2007 gross margins came in at 46.1 percent, a decrease of 2.0 percentage points compared to the same period last year, due to aggressive discounting to reduce stocks built up from a warm winter.  Meanwhile, inventory turnover days on sales for first quarter 2007 were reduced to 34 days, down from the 35 days recorded at the end of 2006.  On March 31, 2007, the Group had approximately HK$741 million in net cash and bank balances.

Non-consolidated Markets 

First quarter sales in South Korea were 5.0 percent lower compared a year ago while sales in the Middle East has shown strong growth, increasing by 13.3 percent year-on-year.  

On March 31, 2007, the Group held 49.4 percent in its South Korean jointly controlled company and 20.0 percent in its Middle East associate company.

Store Network

The Group added 26 outlets to its network in the first quarter, with 12 in China.  Our global network stood at 1,793 outlets as at the end of March 2007.

Giordano International Limited is a leading international retailer of men’s, women’s and children’s apparel under the brand names “Giordano”, “Giordano Ladies”, “Giordano Concepts”, “Giordano Junior” and “Bluestar Exchange”. Established in 1981, Giordano International now operates over 1,700 stores and counters in Greater China, Japan, Korea, Southeast Asia, Australia, India and the Middle East.