Chow Tai Fook successfully ascended to the throne of Satan Nu.
On April 3rd, the Hong Kong fashion group Giordano held a special meeting of shareholders to suspend voting on seven proposals for the appointment and removal of unrelated management personnel proposed by the company’s largest shareholder, Sino Wealth International Limited (indirectly controlled by Chow Tai Fook (Holdings) Limited), in February.
The voting result is that all 7 decisions were approved by approximately 66% of the votes. This means that the governance within the country of Giordano has officially changed.
Among them, the changes in the members of the board of directors proposed in the first to fifth decisions shall become invalid immediately after the conclusion of the special general meeting of shareholders. Liu Guoquan, former President and CEO of the Board of Directors in Jordan, has been dismissed from his position as a director and automatically ceases to serve as President of the Board of Directors and all positions held by him in committees under the Board of Directors. At the same time, Colin Melville Kennedy CURRIE was appointed as an executive director, Zheng Zhiwen and Zheng Zhiliang were non-executive directors, and Huang Weide was independent non-executive director.
According to the 6th decision, a board meeting was held in Jordan on April 5th, appointing non-executive director Zeng Anye as the president of the board, executive director Colin Melville Kennedy CURRIE as the CEO, and former non-executive director Li Zhixuan as the executive director. The three individuals were also appointed to serve on the board committee. Liu Guoquan’s position as CEO was dismissed.
Giordano Notice
At this point, Chow Tai Fook further strengthened its control over the domestic board of directors of Giordano, with the previous 8 members reduced to 11, and the relevant members of Chow Tai Fook were reduced from 2 to 5.
According to the resumes of the aforementioned employees, the current President of the Board of Directors of Giordano, Zeng Anye, is currently the CEO and director of Chow Tai Fook Enterprises Limited (hereinafter referred to as “Chow Tai Fook Enterprises”), which is a private investment holding flagship company of Zheng Yutong’s family. Chow Tai Fook Holdings, a director of Chow Tai Fook (Holdings) Limited (hereinafter referred to as “Chow Tai Fook Holdings”), is an indirect major shareholder of Giordano in China. Zeng Anye is also the nephew and half son of Zheng Jiachun, the second generation successor of the Zheng family.
And the non performing directors Zheng Zhiwen and Zheng Zhiliang are the daughters and sons of Zheng Jiachun, respectively, who are also responsible for important positions in companies under the control of Chow Tai Fook Holdings.
The newly appointed CEO Colin Melville Kennedy CURRIE, as well as the executive director Li Zhixuan, although serving as the work manager, can still be considered as Chow Tai Fook’s “own people”. The former was previously responsible for the Managing Director of Adidas Asia Pacific and Greater China, and currently serves as a staff officer at Chow Tai Fook Enterprises; The latter was added to Chow Tai Fook Corporation in 2013 and currently serves as the Senior Vice President of Chow Tai Fook Corporation.
Since becoming the largest single shareholder of Giordano in China in 2011, Chow Tai Fook has not been seeking control of the country for the first time.
After the founder of Giordano, Li Zhiying, gradually cashed out before 2000, the domestic equity structure of Giordano has been crowded. Volkswagen, with shareholders holding the majority of shares and the management not being the major shareholder – during the tenure of Liu Guoquan, the three executive directors of Zodanu, Liu Guoquan, Chen Jiawei, and Luo Xuewen, held a total of no more than 2% of the shares.
In 2012, Chow Tai Fook Holdings indirectly held over 24% of the domestic shares of Giordano through its subsidiaries. At that time, Chow Tai Fook Holdings dispatched Zheng Zhigang, a member of the Zheng family, and Chen Shichang, an executive director of Chow Tai Fook Jewelry Group Co., Ltd., to be appointed as non executive directors in Jordan. The two did not resign until 2022 and were replaced by Zeng Anye and Li Zhixuan.
In 2022, Chow Tai Fook also made an offer to privatize Giordano, but due to the lower offer price, it was rejected by shareholders led by David Webb, the then second largest shareholder (holding 5% of the shares), and the offer ended in failure.
According to Hong Kong media “Sing Tao Headlines”, Liu Guoquan claimed that Chow Tai Fook Enterprises had fought with him and expressed a desire for him to resign voluntarily because “having a CEO who has been working here for over 30 years will hinder them from making major changes.”. However, Liu Guoquan, who disagrees with his views, believes that now is a time of “high winds, slow waves, and heavy rain”, and the company should be vigilant and cautious, without making major changes.
As a veteran of the country, Liu Guoquan, who is now 70 years old, joined the country in 1987 and has been in charge of the board of directors and CEO since 1994. He has been in charge for exactly 30 years.
In practice, a consistently stable guide can help businesses navigate and implement long-term growth strategies. But the identity of Liu Guoquan and other executives who perform as directors may also make them lack the energy for renovation and reform.
Cheng Weixiong, a senior brand governance master in the footwear and clothing industry and founder of Shanghai Liangqi Brand Governance Co., Ltd., told Interface News that under the long-term control of the work manager, Giordano tends to operate in a step-by-step manner in China, including placing more emphasis on regulating sales, expenses, and gross profit margins, leaning towards short-term thinking, and lacking innovative changes.
This has to some extent led to Liu Guoquan’s guidance, and in the past decade, the country of Zodanu has fallen into a difficult situation of growth and decline in business development.
From 2011 to 2018, the annual revenue of Giordano in China remained stuck at over HKD 5 billion. In 2019, it fell below HKD 5 billion, and from 2020 to 2023, it further declined to over HKD 3 billion, returning to the level of 20 years ago – in 2003, the revenue of Giordano in China was HKD 3.4 billion.
However, the domestic dividend of Giordano is still uncertain. During this period, it only suffered a loss of 112 million yuan in 2020, and dividends were paid in other fiscal years. During his tenure, Liu Guoquan has always adopted a high interest strategy, which is also the reason why small shareholders in the department support his dismissal.
Cheng Weixiong believes that Zodano has not been able to compete with Uniqlo and other foreign brands in the mainland Chinese market, and the focus is still on being “not accustomed to the local environment”.
“Giordano is still using ‘local knowledge’ to create the entire mainland Chinese market, but there are significant differences within the Chinese market. It is provocative to strictly follow Hong Kong’s set of gameplay. From the perspectives of brand, product, channel, and user satisfaction, Giordano is not doing well enough.”
For example, when it comes to the number of SKUs under the Giordano brand, compared to mainland leisure clothing brands such as Metersbonwe, Sema, and Yichun at the time, it is simply incomparable, according to Cheng Weixiong.
Interface news also mentioned in previous reports that Giordano has not been able to face the provocations brought about by changes in the market situation in China, and has not adopted continuous and in-depth reforms. Instead, it has been “guerrilla” in space and wavering in its transformation tendency.
In order to avoid positive cooperation with domestic fast fashion brands and master operational costs, Zodano once shifted to third – and fourth tier cities in mainland China and Southeast Asian markets around 2017. Prior to this, first and second tier cities in mainland China had always been its main market. In recent years, overseas markets outside of Greater China (mainly Southeast Asia and Gulf countries) have contributed over 50% to the domestic development of Jordan.
Giordano also hesitated between further sinking and high-end transformation domestically. It has launched mid to high terminal brands, but most of them have not been able to splash water. After launching a lower end sub brand, Beau Monde, in 2015, it also expressed its intention to break free from the label of “low-end goods” and open up a new low-priced outdoor brand in 2017- but these plans have not been fully implemented since then. Giordano Ladies, the only slightly broader mid to high end brand under Giordano’s domestic umbrella, has not been able to lose more capital balance.
Cheng Weixiong believes that branding, product development, channels, and user satisfaction all require medium to long-term efforts. If old brands like Zodano do not make creative changes, they cannot wait for the younger generation of new users.
“As a major shareholder, Chow Tai Fook may combine short-term and medium to long-term cost considerations for the domestic market of Giordano, which was previously solely controlled by its management. In addition, it may adjust its position as the upper hand for capitalization operations of listed companies, and only by doing well in the brand of Giordano, which has a certain accumulation, can there be a cost.” said Cheng Weixiong.
Chow Tai Fook did not disclose to the outside world the reasons for his insistence on entering the country of Giordano. Zheng Yutong expressed in his early years that he held shares in Giordano mainly because its dividend payout rate was very attractive to issuers, and that he removed his shares for long-term investment.
But if it’s just for the sake of gaining investment profits, Chow Tai Fook may not have to persist in reforming the domestic market of Giordano, after all, revitalizing this outdated brand is not an easy task, and Chow Tai Fook did not have a history of dressing up as a brand before. Moreover, under the guidance of Liu Guoquan, Giordano’s domestic revenue was not completely “incurable” – from 2020 to 2023, its revenue increased continuously from 3.122 billion yuan to 3.873 billion yuan.
Whether this move by Chow Tai Fook has other strategic implications has also triggered external predictions. Liu Guoquan once expressed in 2012 whether Giovanni could have more opportunities to cooperate with Xintianxia and Chow Tai Fook – the two most focused business sectors under Chow Tai Fook Holdings – real estate and jewelry. “For example, renting exhibitions together in mainland China and striving for more favorable conditions, or growing markets in the new world, we can also make more exchanges.”
From this perspective, it can be seen that offline wholesale distribution or the intersection of Chow Tai Fook and Giordano Capital’s common advantage.
The expansion strategy of Chow Tai Fook Jewelry Group (hereinafter referred to as “Chow Tai Fook Jewelry”) is to rely on franchisees to participate in underground horse racing in China. According to the latest financial report of Chow Tai Fook Jewelry, as of the end of September 2023, Chow Tai Fook Jewelry has a total of 7699 stores in mainland China, of which 42.1% are located in second tier cities and 45.5% are located in third tier and below cities; 76.9% are franchise stores.
In addition, Chow Tai Fook Jewelry also has single digit wholesale points in multiple Southeast Asian countries such as Malaysia, as well as Japan, South Korea, Canada, and the United States.
Although the scope of offline stores in Zodano’s domestic market has shrunk in the past few years, it has also hindered underestimation, especially in overseas markets. By the end of 2023, Jordan has a total of 695 stores in mainland China, Hong Kong, Macao, and Taiwan, 559 stores in Southeast Asia (including 190 franchise stores), 178 stores in the Gulf Cooperation Council, and 120, 69, and 24 franchise stores in South Korea, South Asia, and Africa, respectively.
If Giordano wants to explore quality reduction in downstream markets domestically, or if Chow Tai Fook Jewelry intends to increase its overseas business, Chow Tai Fook’s entry into Giordano’s domestic market may play a role in the future.