Singapore listed electrical and furniture retailer Courts Asia has reported a 27.9 per cent drop in first quarter profit.
In its key Singapore market, which accounts for 66.3 per cent of group sales, it recorded a 5.9 per cent drop due to less participation in trade show days and weakened consumer sentiment.
In Malaysia, sales rose 8.2 per cent, with new stores opened in the second half of last financial year contributing to the growth.
Total group sales were S$194.1 million for the quarter to June 30, representing a marginal dip of 1.5 per cent year-on-year. But net profit declined 27.9 per cent to $5.1 million. The company said higher distribution and marketing costs as well as administrative expenses relating to the group’s expanding its footprint and operations in the region, dragging the figure down.
Courts Asia’s executive director and group CEO Terry O’Connor said the company expects Singapore’s performance to remain lacklustre in the short term.
“Apart from cost efficiency initiatives, we have been actively working on margin enhancing initiatives. At the same time, we are making good progress in transforming ourselves into a full-fledged omnichannel retailer to increase the touch-points with our customers and enhance the consumers’ shopping experience,” he said in a statement.
“In Malaysia, whilst we have seen some topline contribution from new stores, we have observed that the consumption pattern for the period leading up to Hari Raya was fairly muted. The tighter control on household borrowings by the Malaysian government has negatively impacted consumer sentiments. At the same time, we experienced some teething issues in the migration to Navision, a new ERP system, which had some impact on business.”
Gross profit margin improved 2.1 percentage points on higher service charge income from Malaysia and a shift in sales mix towards electrical and furniture categories that carry a higher margin.
In line with Courts’ business expansion, distribution and marketing expenses rose 17.5 per cent to $17.8 million, driven by an increase in advertising expenditure following a more aggressive marketing campaign. Administrative expenses increased 12.3 per cent.
The brightest news on the horizon is the company’s expansion into Indonesia where its first Big-Box Megastore opened in Jakarta last month.
“We remain firmly focused for three stores to be operational in greater Jakarta by calendar year 2015,” O’Connor added.
“At the same time, we remain open to opportunities in the region and are keen to engage in collaborations to broaden our income streams. In the mid to long term, we continue to remain optimistic on Asia’s solid fundamentals, built on rising middle class and growing disposable income.”
Courts Asia operates more than 70 stores in Singapore, Malaysia and Indonesia, spanning over 1 million sqft of retail space.
