The Hong Kong drugstore chain has delivered double-digit growth in quarterly sales, driven by tourist and online spending, after axing its Chinese stores



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<h4>Key Takeaways:</h4>



<ul>
<li>Third-quarter revenue rose 12.5%, boosted by higher same-store sales in its core markets of Hong Kong and Macao</li>



<li>E-commerce revenue climbed 14.9% after a switch to online-only sales in mainland China, but the share of overall turnover barely increased  </li>
</ul>



A corporate makeover has added a little luster to the latest sales figures from  cosmetics retailer Sa Sa International Holdings Ltd. (0178.HK).



The long-established Hong Kong brand put all its Chinese outlets under the knife last year, deciding to go purely online in the mainland market in a major strategy shake-up. The pain may be starting to pay off, judging from the company's latest results, although investors have yet to be convinced.



It's a familiar story of Chinese retail. After a fitful recovery in consumer spending, several drugstore chains have scaled back their bricks-and-mortar presence in mainland China over the past two years. Shops selling multiple beauty brands have faced particularly stiff pressure from sky-high rents, fragmented footfall and increasing incursions from digital sales channels.



Sa Sa started out in the 1970s as a tiny family-owned outlet in a Hong Kong mall, developing into a stalwart of the territory's retail scene with its distinctive pink storefronts. It operated for two decades in the mainland market but last year made a complete retreat from offline retailing in China, shuttering its entire network of 18 stores in the face of sustained earnings pressure. Another cosmetics chain, Manning, announced late last year it was following suit. With the departure of Manning – owned by DFI Retail Group Holdings Ltd. (D01.SI) – only Watson was left with a physical presence in China out of Hong Kong's big three drugstore brands.



The shift responds to changing consumption patterns in China. Where once a new store was bound to turn a profit, now a Chinese outlet risked becoming a money pit. Sa Sa's revenue slipped around 10% in its fiscal year to the end of March 2025, and net profit plunged 64.8%. 



The picture looked a little brighter in the update for the quarter ending in  December, with earnings freed from the drag of the Chinese store network and lifted by stronger sales in the core markets of Hong Kong and Macao.



The company reported that revenue jumped 12.5% to HK$1.16 billion ($1.49 million) from the year-earlier quarter. Offline sales grew 12% to HK$952 million in the three months, while online sales jumped 14.9% to HK$207 million. 



<h4>Tourist-driven recovery</h4>



The figures contrast starkly with the same quarter of last year, when sales sank 10.7%, hit by a 35% plunge in mainland revenue to just HK$25.1 million. During the first half of the fiscal year, overall sales were subdued as online income barely held steady and the offline segment was dragged down by weakness in mainland China and cautious tourist spending.



The improved third-quarter performance was driven by brisk business in Hong Kong and Macao, where same-store sales jumped 14.7%, with rising transaction volume and average ticket value signaling stronger demand. Offline turnover in the two markets rose 11% year on year, while sales in Southeast Asia increased by 14%.



With the third quarter serving as the peak retail season, Sa Sa stepped up promotions and worked with its partners to offer limited-time deals, fueling the double-digit growth across offline and online channels. With a continued rise in mainland visitors to Hong Kong and Macao, stores in traditional tourist areas recorded better-than-expected growth, the retailer said.



Figures from Hong Kong's tourist board show visitor arrivals rose 9% to 4.65 million in December from the same month a year earlier, with the number of mainlanders in the mix rising 8% to 3.35 million. Other statistics from the Hong Kong authorities showed the sales value of medicines and cosmetics rising 9.2% in November on a year-on-year basis, with volume up 8.1%, reflecting a rise in spending by residents and tourists. Sa Sa, with its extensive store network and brand recognition in those markets, was well-placed to benefit.



<h4>Online uplift</h4>



Sa Sa's online sales also advanced, spurred by peak travel season and product promotions. The mainland market is the firm's main e-commerce engine, accounting for 47.5% of online sales, followed by Hong Kong and Macao at 33.6% and Southeast Asia and other regions at 18.9%.



With the closure of Chinese stores, Sa Sa's mainland sales are mostly conducted via its WeChat account, complemented by third-party channels such as Tmall, Douyin, Pinduoduo and JD.com. Its monthly active users on WeChat had notched up a year-on-year jump of 40.8% by the middle of the fiscal year.



However, even with the uplift, online sales still contributed only 17.8% of total revenue in the third quarter, barely higher than the 17.1% level a year earlier, casting doubt on whether a fundamental shift is underway.



The gamble on shrinking its physical footprint in China in favor of online sales has certainly not backfired, based on these figures. And with the return to double-digit growth, the company's pivot could boost profits over time.



Still, investors may take a bit more convincing. Sa Sa shares edged up 1.3% to HK$0.6 on the sales news, although trading volume stayed thin. The price-to-sales ratio of just 0.45 times implies market participants doubt the firm's ability to regain its share price peaks of a decade ago.



The quarterly figures could be taken as a sign that the retailer is on the right track after cutting its costly mainland exposure. For investors to fully buy in, the veteran beauty retailer would need to build on the momentum to deliver reliably stable earnings.



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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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Sa Sa International Holdings Ltd. reported a 12.5% increase in third-quarter revenue, driven by strong sales in Hong Kong and Macao, following a strategic shift to online-only sales in mainland China. The company's e-commerce revenue rose 14.9%, although overall online sales still represented only 17.8% of total revenue. The closure of its Chinese stores has alleviated earnings pressure, with offline sales in core markets also showing growth. The retailer benefited from a recovery in tourist spending, with visitor arrivals in Hong Kong increasing by 9% in December.

Corporate Makeover Adds Luster To Sa Sa's Sales Numbers