Malaysian department store operator Parkson has shrugged off negative publicity about its Vietnam operations saying it remains committed to the market.
Today, (Monday January 11), Parkson opens its 10th store in the market, in the fast-growing beachside city Danang.
“Parkson remains positive on the retail market in Vietnam as can be seen in the opening of Parkson store in Danang… as part of our expansion plans,” CEO Toh Peng Koon said on Friday.
Earlier this month Parkson closed one of its two stores in Hanoi, advising concessionaires to remove their stock. The sudden closure was widely reported in Vietnamese news media, who said the closure was related to poor sales.
However a Parkson spokesperson has since described the closure of the Keangnam store in Landmark Tower as “temporary”.
“We have temporarily closed the Parkson store in Keangnam Landmark Tower in Hanoi as it has been incurring losses since its opening three years ago, mainly due to the high rental costs and low traffic,” he said.
There is talk of an impasse with the building’s owners over rental terms for Parkson.
Parkson Retail Asia, the holding company of Parkson Vietnam, reported a 33.1 per cent fall in net profit to RM18.43 million (US$5.27 million) in the third quarter of 2014, with low sales in Vietnam identified as a factor.
Toh Peng Koon reportedly said while sales have been rising in Indonesia and its newest market Myanmar, it has faced difficulties in Vietnam, where consumers are still not spending in mid-market stores, and in its home market of Malaysia where consumers are reducing spending, worried about the impact of the introduction of GST on April 1.
With new stores being opened in suburban locations rather than CBDs, the time it takes for stores to build sales momentum and profitability is longer.
Meanwhile, AmBank Research said in an investor guide that it is not surprised by the Hanoi closure which it considers a positive move and a reflection of the retailer’s “proactive store management”.
“This is a positive move, in our view, given this store has been loss-making since its opening three years ago, largely due to high rental cost and low footfall traffic.
“We believe that the swing factor for an improvement in Vietnam’s operation largely hinges on the closure of this loss-making store, in addition to its strategy to improve merchandising mix.”
