Sa Sa International Ltd (莎莎) plans to open at least 10 stores in Asia in the next six months and expects a surge in sales to Chinese tourists in its home market of Hong Kong to continue, a company executive said.
Sa Sa, which has 30 percent of Hong Kong's cosmetics market, plans to add three outlets in the city for a total of 36, chief financial officer Guy Look said in an interview. About four-fifth's of the company's sales come from the city.
"We have been successful in Hong Kong," Look said. "We see strong growth in both local and tourism spending."
About 90 percent of the company's sales to tourists in Hong Kong are to Chinese visitors, he said.
Sa Sa shares have doubled this quarter as investors bet China's relaxed rules on Chinese visiting Hong Kong will boost sales. Sa Sa is one of the most popular Hong Kong stores among Chinese tourists, Credit Lyonnais SA wrote in a report.
The stock is trading at 36 times last year's earnings, almost four times the price to earnings ratio of Bonjour Holdings Ltd, another Hong Kong-listed cosmetics retailer.
"Sa Sa shares are expensive," said Kenny Tang, associate director of research at Tung Tai Securities Ltd.
Look said he expected Sa Sa's Hong Kong sales to increase 10 percent this year. The company sold 20 percent more cosmetics in July and last month than a year earlier, after sales slumped as much as a fifth during the second-quarter SARS epidemic.
"It's a faster recovery than we had expected," Look said.
Sa Sa, which has 60 stores across Asia, plans to open one additional store in Taiwan and three more stores each in Singapore and Malaysia, Look said.
Although Sa Sa is popular with Chinese, the company has no stores in China yet. Look said the company plans to open one or two "prototype" stores in Beijing, Shanghai or Guangzhou in the next 12 months.
"China is a very important market," Look said. "It's much bigger and more diversified."
The company hasn't decide whether to enter China on its own or with a venture partner, he said.
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