Ports Design: On track to achieve 2011 network expansion goal

High-end Chinese fashion retailer Ports Design Ltd (0589.HK: Quote, Profile, Research, Stock Buzz) said on Monday that it is on track to achieve its 10 percent network expansion target for 2011.

(Expansion) will continue at a rate of about 10 percent per year, Chief Executive Alfred Chan said during the Reuters China Investment Summit, adding that the company currently had about 380 stores.

Competing in China with Prada SpA's (1913.HK: Quote, Profile, Research, Stock Buzz) Miu Miu and labels such as Max Mara, Ports Design generates retail turnover from its brands PORTS, BMW Lifestyle, and to lesser extent licensed brands such as Armani, Versace, Ferrari and Vivienne Tam.

The increasing spending power of Chinese consumers in recent years has seen consumption of luxury products surge at double-digit rates as increasingly brand-conscious shoppers splash out on designer bags, scarves and clothes.

Despite fears of slowing growth in the country, consumers are well positioned to continue to spend, boosted by an appreciating currency, rising affluence and government policies to spur consumption of disposable income.

In August, Ports Design said profit attributable to shareholders rose slightly to 213.1 million yuan ($33.6 million) for the first half, from 209.2 million yuan a year earlier. Turnover grew 13.8 percent to 897.7 million yuan during the period, but net profit margin declined to 23.8 percent on an increase in the effective tax rate.

It is going to be a very rewarding market but also extremely competitive, Chan said, adding that brands with an international presence were expected to have a better chance of surviving as consumers became increasingly sophisticated.

Ports Design would continue to expand through building its retail network instead of through acquisitions, he added.

Shares of Ports Design have fallen more than 41 percent this year, compared with a 15 percent drop in the blue chip Hang Seng Index .HSI.

CLSA Asia-Pacific Markets forecasts the Chinese luxury market to exceed $100 billion by 2020. Including travel, Greater China demand is expected to account for 44 percent of the global luxury goods market. (For summit blog: blogs.reuters.com/summits/) ($1 = 6.342 yuan)