Mainland Headwear Holdings Limited, which manufactures much of the sports headwear for vendors here in the U.S. and also holds the rights to the LIDS format in Asia, said that it saw growth in revenues across all business segments in the first half of the year, but the “relatively lower” rate of growth in profits was the result of “an increase in the manufacturing labor cost derived from the Group’s efforts to retain and strengthen its skilled work-force.” The company also continues to see the effects of rising raw materials costs.
Mainland Headwear reported that it posted a 37% increase in revenues for the first half through June 2006, recorded turnover of HK$319.5 million ($41.2 mm), while profit attributable to shareholders increased 8% to HK$38.9 million ($5.0 mm) and basic earnings per share rose 8% to 13.6 HK cents (1.8 cents).
Manufacturing revenues increased 22% for the period to HK$209.7 million ($27.0 mm), but gross margins decreased to slightly below 32%, due in large part to the increase in raw materials and rising labor costs. The Group continued to expand its reach, and on June 30, 2006, acquired Kangol Headwear (Panyu) Limited, which manufactures about 85% of the headwear of the Kangol brand.
Trading Business revenues increased by 30% to HK$129.6 million ($16.7 mm), mostly attributable to strong growth in the private label business, which accounted for 22% of Trading revenues. Gross margin recovered to slightly above 25%.
Retail Business revenues increased by roughly 275% to HK$32.1 million ($4.1 mm), representing about 10% of the Group’s total revenues. The rapid growth was attributed to the continued expansion of the LIDS and Sanrio operation, an investment that caused the Retail Business to post a loss of about HK$4.0 million for the period. As of June 30, the Group had opened a total of 31 self-owned LIDS stores, of which 8 were in Hong Kong and 23 were in the PRC. The Group had a total of 6 franchised LIDS stores in the PRC at period-end.
