Department store operator Parkson Retail Asia has posted a first quarter profit fall of 33.1 per cent after poor sales in Vietnam and Malaysia.
But the company says measured on a same store basis, the decline would have been 8.2 per cent and with currency fluctuation discounted from the result, seven per cent.
Its disappointing result came despite a 33.2 per cent increase in sales in its Myanmar store and improved performance in Indonesia where consumer sentiment is on the rise.
The company posted a net profit of S$6.9 million for the quarter to June 30, with gross sales proceeds up 1.7 per cent and revenue up 1.2 per cent. Its merchandise gross margin improved to 23.8 per cent.
Group CEO Toh Peng Koon described the retail environment as “challenging” in the quarter.
“In the midst of a challenging environment in the retail industry, we are pleased to have managed to achieve growth in our overall gross sales proceeds and revenue. While we see improvements in markets such as Indonesia and Myanmar, certain markets are facing headwinds, including Malaysia and Vietnam. Our bottom line was affected by the losses incurred by our new stores due to their gestation period. It is necessary to make such investments in order to build a larger and stronger base for the group.
“We look forward to the sales performance of these new stores normalising towards profitability in the near future,” he concluded.
The company said same store sales fell in Malaysia and Vietnam and the weak value of the Indonesian Rupiah also took its toll.
“The discretionary retail environment in Vietnam remained difficult in the first quarter despite signs of economic recovery,” the company said in a statement.
“In Malaysia, the consumer sentiment index fell below the 100- point confidence threshold for the third quarter calendar year 2014. This was due to the impact of the country’s central bank tightening of interest rate and increase in the costs of living resulting from the government’s subsidy rationalisation programs. These factors led to an overall weaker 1QFY2015 SSS of negative 4.4 per cent in Malaysia and negative 5.5 per cent in Vietnam.”
Recorded first quarter profit before tax declined by 27.9 per cent year-on-year to S$10.5 million. “This was due to losses incurred by new stores during their gestation period and the de-leveraging impact from the negative same store sales of the Malaysia and Vietnam operations.”
On the year ahead, Toh Peng Koon said: “Despite the macro environment displaying mixed signals of development, we remain focused on enhancing our fundamentals. With our strong balance sheet, we are able to ride out the gestation period of the new stores and overcome the current challenges experienced in Malaysia and Vietnam.
“At the same time, we are constantly prepared for opportunities to expand our footprint in the key regions of our operations. We remain committed to maximising shareholder returns.”
