Cost rises Giordano fully fades out of garment manufacturing

Giordano International (00709, HK) announced yesterday that it will sell its 51% stake in Placita Holdings Limited, its main garment manufacturing subsidiary. According to the transaction agreement, Giordano sold 21% of placita for 22.9 million Hong Kong dollars in the first phase of the transaction. The expected revenue was 12.60 million Hong Kong dollars, and the remaining 30% of the equity was sold on an option basis.

Abandon production to external procurement

All indications are that Giordano is slowly withdrawing from garment production under pressure from operating costs. Just early last month, Giordano had just completed a shareholding reduction deal with Swift Universal Garment (Hong Kong). After the transaction was completed, the equity of Swift Global held by Giordano was reduced from the original 49% to 9.9%.

Giordano's assistant chairman said in an interview with the "Daily Economic News" yesterday that the company will gradually reduce its garment manufacturing business in the future and focus on developing the retail business in the Mainland. He pointed out that Giordano's competitive advantage lies in the design of clothing and merchandise marketing, rather than the production of apparel products, so the long-term strategy should focus on the development of profitable retail businesses.

According to relevant data, Giordano is increasingly increasing its outsourcing efforts, laying the groundwork for the gradual release of its production operations. Giordano and CEO Liu Guoquan also revealed that they would prefer external procurement, and internal procurement fell from 25.7% in 2006 to last year. 16.2%, of which 13.4% were purchased from Placita.