"Chinese Market Stable, Reflecting Domestic Economic Downturn"
Discovery Secures Distribution Rights in 11 Countries, Strong Performance Expected in Second Half
F&F recorded an operating profit of 91.8 billion KRW in the second quarter, down 16.6% compared to the same period last year. While the company posted solid results in the Chinese market, it is analyzed that weak domestic consumption led to poor overall performance.
According to the Financial Supervisory Service's electronic disclosure system on the 26th, F&F's second-quarter sales amounted to 391.4 billion KRW, a 3.5% decrease from the same period last year. Net profit for the period fell about 15% to 74.5 billion KRW. The securities industry had estimated sales of 414.2 billion KRW and operating profit of 99.2 billion KRW. Both second-quarter sales and operating profit fell short of market estimates by 11% and 7%, respectively. F&F holds licenses for brands such as Discovery, MLB, and MLB Kids, producing and selling products under these licenses.
The second quarter is traditionally an off-season in the fashion industry, with significantly lower sales. This is because clothing prices are lower compared to fall and winter apparel, and consumers tend to reduce spending due to summer vacation plans. Especially this year, with persistent high inflation, consumers have tightened their wallets, likely exacerbating the sales slump.
Although detailed performance figures have not been disclosed, sales are expected to have declined mainly in the domestic and duty-free channels. In the duty-free channel, the reduced volume from "ttak-kkun" (daigou) traders is believed to have impacted results. While consumption in the Chinese market has decreased due to the economic downturn, demand for brands like MLB has continued, likely resulting in steady growth. An F&F official explained, "Despite strong growth in the Chinese market, sales declined due to the domestic economic recession."
With the significant contraction in second-quarter sales, the company's sales and operating profit for the first half of the year both showed negative growth. Half-year sales totaled 898.5 billion KRW, down 0.5% from the first half of last year, and operating profit decreased 14.4% to 222 billion KRW.
However, F&F expects a significant improvement in performance in the second half of the year due to the additional acquisition of the Discovery license. Starting from the 25th, F&F acquired licenses for the Discovery brand in 11 countries including China, Southeast Asia, and Taiwan. The contract period extends to 2039, with priority negotiation rights for an additional 15-year extension secured. F&F's annual sales last year were 1.98 trillion KRW, with Discovery sales accounting for 24%, or 465 billion KRW. F&F plans to open its first store in Shanghai, China, within this year.
An F&F official stated, "With the steady growth of MLB in China continuing, and the new growth engine secured through Discovery's entry into the Asian market starting in the second half of this year, global growth is expected to continue."
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