"In the past, young girls accompanied by their mums would buy their first lipstick after they graduated from high school," said Simon Kwok Siu-ming, the chairman and chief executive of Sa Sa, at a Chinese General Chamber of Commerce forum yesterday. "Now I see many teenagers buying nail polish on their own."

 

Sa Sa also sees a potential market in the elderly as senior citizens are beginning to increasingly use cosmetics.

 

"Many people worry about the topping out of Hong Kong cosmetic sales but I believe the market has yet to reach its peak," Kwok said.

 

Sa Sa plans to open eight to 10 outlets in the city annually in the next three to five years.

 

This is despite rental costs hovering at high levels, especially street-level shops in prime locations that are highly sought.

 

Sales at Sa Sa's about 100 outlets in Hong Kong and Macau, which account for 80 per cent of the company's total sales, jumped 20 per cent year on year to HK$2.6 billion in the six months to September.

 

Net profit increased 32 per cent to HK$375 million, bolstered by domestic consumption and mainland tourists.

 

The positive effect of allowing individual mainland tourists to visit Hong Kong, which began 10 years ago, had shown signs of abating. For example, Sa Sa's sales during the golden week holiday in October fell short of its target.

 

Kwok said in the long run, the high-speed railway connecting Hong Kong with mainland cities and the completion of the Hong Kong-Zhuhai-Macau bridge in 2016 would bring more mainland tourists to Hong Kong and stimulate retail sales in the city.

 

The mainland market accounts for 5 per cent of Sa Sa's sales.

 

Kwok said the mainland had great potential as its market size was 18 times bigger than that of Hong Kong.

 

However, the company has found it tough expanding on the mainland. Its 58 shops there suffered a deficit of HK$27.2 million in the first half, adding to an eight-year losing streak.

 

Sa Sa's shares yesterday closed 0.22 per cent lower at HK$8.92, against an overall market fall of 0.28 per cent.