Turnover for the quarter ended September 30, 2006, increased 6 percent compared with the same period last year. The Group’s sales for the nine months ended September 2006 were 2 percent lower year-on-year, an improvement over the 6 percent decrease recorded in the first half of 2006. All brands posted sales improvements during the quarter. In particular, Giordano saw third quarter turnover increase by 7 percent year-on-year, while Giordano Ladies posted a 13 percent sales gain. Mainland China recorded the best performance among our key markets, with third quarter sales up 22 percent and comparable store sales up 11 percent on a year-on-year basis. Hong Kong and Singapore posted sales gains of 1 percent and 6 percent respectively while Taiwan sales decreased by 2 percent year-on-year. Gross margin for the nine months ended September 2006 came in lower at 49.5 percent as a result of more aggressive stock clearances. The Group added 42 outlets in the third quarter, with 14 in Mainland China, bringing its global network to 1,740 outlets.

“During the third quarter, we pushed hard on various strategic initiatives such as the launch of our first total look Giordano Concepts store. The new “total look” store in Mongkok, Hong Kong, has received positive customer feedback and support. Since our launch in spring, we have opened 14 Giordano Concepts stores, and we will be investing an additional HK$20 million for a 2007 rollout. Our rapid success in achieving consumer recognition and acceptance in a new market segment underscores the strength of the Giordano brand,” said Peter Lau, Chairman and Chief Executive of Giordano International Limited. “In addition, we are encouraged by the pickup in sales in our various territories, especially the strong showing in Mainland China, our biggest market. Sales continue to be strong and steady with the arrival of cooler weather. We continue to invest in our brand, laying a solid foundation for continued growth and expansion,” continued Mr Lau.　

Sales Performance by Business Segment 　

Both the Retail & Distribution and the Garment Trading & Manufacturing divisions saw improvements in the third quarter. On a year-on-year basis, Retail & Distribution sales increased by 4 percent and Garment Trading & Manufacturing sales to external customers increased by 16 percent, producing an overall turnover increase of 6 percent for the Group in the third quarter.　

Retail & Distribution Division - Sales Performance by Brand

Giordano Ladies continued to achieve strong performance in the third quarter, with sales up 13 percent and comparable store sales up 9 percent year-on-year. Meanwhile, Giordano sales and comparable store sales grew by 7 percent and 1 percent respectively. Performance of Bluestar Exchange also improved. Overall, sales of the Retail & Distribution Division for the nine months ended September 2006 were down 2 percent year-on-year compared to the 4 percent decrease recorded at the end of the first half. 　

  Retail & Distribution Division - Sales Performance by Market　

All of the Group’s major markets posted better performance in the third quarter, with Mainland China achieving the best performance with sales up 22 percent and comp store sales up 11 percent on a year-on-year basis. Hong Kong and Singapore sales grew by 1 percent and 6 percent respectively in the third quarter. Due to challenging market conditions brought on by the political crisis, Taiwan sales decreased by 2 percent in the third quarter, though this represents a significant improvement over the 18 percent decrease posted in the first half.

Margins, Inventory and Cash

Gross margins came under pressure as a result of aggressive clearance of stocks to make way for new merchandise. Nevertheless, the Group still maintained a healthy 49.5 percent for the nine months ended September 2006, 0.9 percentage points lower compared to the same period last year. Inventory turnover days on sales for the nine months ended September 2006 were 37 days (September 2005: 35 days), a slight increase as we build stocks in preparation for the Fall/Winter seasonal changeover. On September 30, 2006, the Group had approximately HK$611 million in net cash and bank balances 　

Non-consolidated Markets

Sales in South Korea was up 6 percent in the third quarter on a year-on-year basis, a performance strong enough to overcome the challenges experienced in the first half so that the 9 months ended September 30, 2006, resulted in an overall improvement on a year-on-year basis. We continue to be confident in the future of our Middle East market, though the war in Lebanon dampened consumer confidence and caused third quarter sales in the Middle East to decrease by 3 percent year-on-year.

Store Network

The Group added 42 outlets to its network in the third quarter, with 14 in China and 10 in Taiwan. Our global network stands at 1,740 outlets as at the end of the third quarter. This third quarter growth spurt places us in a strategically advantageous position as we head into the peak fall/winter season. 　

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.