Local fast-food chain Fairwood Holdings (0052) is warning of a significant decline in net profit for the six months ending September 30 due to changes in financial reporting standards, as well as the decline in gross profit margin amid rising rental and labor costs.
The adoption of the new accounting principle will result in higher expenses related to leases being recorded in the company's profit/loss statement in the initial years of the lease, said Fairwood. It expects that the effects on its profit will be offset as the lease goes on.
In other news, retail operators continue to bear the brunt of the ongoing protests. Apparel retailer Bauhaus International (0483) said its net loss for the six months ending September 30 is expected to increase to between HK$60 million to HK$95 million compared to the same period last year.
The unfavorable results were primarily attributed to adverse sales performance in its core markets, particularly in Hong Kong and Taiwan, said the company. It recorded a 21 percent year-on-year decrease in its overall same-store sales growth for the three months ending September, with sales in Hong Kong and Taiwan sliding 17 percent and 46 percent respectively.
The sales performance in Hong Kong was seriously hit by the ongoing social unrest, leading to a decline in tourist traffic and sluggish consumer sentiment, said the company.