On operation SSSG. Of the 9.2% sssg, 4.7% is traffic, 1% is conversion rate, 3% is ticket price increase and less than 1% is exchange gain. As mentioned in the analyst meeting, sssg for FY13 is expected to be in the low teens. Management hopes to maintain the opex ratio at 18% of GSP for FY13.
The commission rate of some mature stores (over 3 years) can be as high as 20-21%. However, in lower-tier cities, it is structurally lower as most of the brands are operated by franchisees/wholesalers.
Rental income is expected to increase at a faster rate compared to GSP growth due to an increase in complementary services to attract customer traffic. The lease area for complementary services wa s 8% of GFA in the past and 20% in 1HFY13; the target is to reach 30%.
On rental cost trend. The rental reduction of its Beijing flagship store, commenced on 1 January 2013, and the annualized benefit on rental to GSP ratio is expected to be c.0.2ppt. Me anwhile, management is not concerned about rental renewal as most old flagship stores are self-owned properties or properties owned by the parent company. In addition, the earliest rental renewal will only be 5 years later (a small 10,000sm store in Ningbo]. In addition, for new stores in lower-tier cities, the company was able to sign turnover rent at the beginning of the first few years of operation. Subsequently, it will convert this into fixed rent as agreed in the leasing agreement. . Its average store age is 7 years.
Sales impact from anti-corruption
Impact from gifting already peaked . Management noted that January is peak season for gifting, and that October-March is peak season for retail. This collides with government meetings for leadership changes in November 2012 and March 2013. Thus, management believes the impact on sales from anti-corruption measures and cautious consumer sentiments may have peaked out. The sales growth performance of watc hes and high-end menswear has been lower than expected.
Average ticket price for 1HFY13 was RMB488, VIP RMB571, non-VIP RMB396 and platinum card RMB1,970. There is a decline in ticket price for platinum cards (from over RMB2,000 previously), which is a reflection of recent anti-corruption measures.