Giordano: Middle East Conflict Affects Logistics Costs

Giordano International (00709) has stated that its operations in the Middle East may be affected by geopolitical uncertainties, potentially putting pressure on consumer sentiment and costs. Executive Director, Chief Financial Officer, and Chief Sales Officer Chen Jiawei pointed out that the Middle East accounts for about 20% of the company’s business, with 144 stores. Business accelerated in the second half of last year, showing good resilience driven by localized product offerings and related marketing. Although initial business was slightly affected by the outbreak of conflict this year, there was a good rebound afterward. The impact is temporarily stable, and stores are operating normally without the need for provisions related to market-specific business. The company hopes that after geopolitical improvements, business can further rebound.

CEO and Executive Director Gao Jiali emphasized that the Middle East business maintained growth in the first quarter of this year. He is monitoring the situation daily and communicating with local operations teams, with a primary focus on employee safety.

Regarding potential cost pressures from the Middle East situation, Chen Jiawei said that geopolitical tensions in the region have intensified over the past few weeks, causing oil prices to surge and affecting logistics costs. However, the impact is not significant, with logistics costs expected to increase by 5% to 10% compared to normal, mainly due to additional surcharges from shipping companies. Last year, inventory turnover days increased by 9 days to 119 days. By the end of the year, a large volume of goods had been shipped, and the Middle East region has sufficient stock to serve customers. The company will continue to monitor the situation and respond accordingly. To maintain gross profit margins, costs may increase, leading to price adjustments. The company plans to support this through product mix improvements—“small but valuable to locals”—and marketing efforts.

Last month, the company’s largest shareholder, Chow Tai Fook’s agent, reached a settlement with the Securities and Futures Commission regarding Giordano, agreeing to return HKD 1.5 billion to relevant independent shareholders. Shareholders must proactively apply before May 16. The deceased activist investor David Webb, holding 5.34%, is one of the major shareholders. If his family claims on his behalf, they may receive over HKD 38 million in compensation.

Giordano Executive Director, Group Legal Director, Chief Business Development Officer, and Chief Human Resources Officer Lo Hok Man stated that the SFC’s announcement is unrelated to the company and was issued solely through the company’s platform. The company has fulfilled its obligations and has no further comments. He expressed sadness over David Webb’s passing and said the company has not contacted his family but believes it will follow the procedures outlined in the announcement.

Giordano declared an final dividend of HKD 0.064 per share, with a payout ratio of 108.5%. Gao Jiali noted that the company has net cash of HKD 698 million as of the end of last year, which supports its consistent dividend policy. Chen Jiawei added that after estimating capital expenditures and other related costs, if cash surplus is identified, the company will return value to shareholders. The payout ratio of 108.5% is appropriate, and the company hopes shareholders will be pleased.

Looking ahead to 2026, Giordano aims for its core business to grow by 3% to 5% annually, with profit growth outpacing revenue growth.