China Nepstar posts loss as network shrinks

China Nepstar Chain Drugstore boosted same store sales by nine per cent last year as it refined its store network and improved its product mix.

The New York listed Chinese retailer opened 130 new stores in 2014 and closed 216, for a total network as of December 31 of 1980.

“Our continuous efforts to streamline business operations, optimise individual store performance, improve product mix and market products proactively through in-store promotions have delivered double-digit growth in revenues and same store sales in the fourth quarter of 2014 compared to the same period in 2013,” said Fuxiang Zhang, CEO.

“Both our prescription and over the counter pharmaceutical products experienced strong sales in the fourth quarter of 2014. We have achieved top line growth for five consecutive years and strengthened customer relationships in a retail environment that continues to be challenging.”

The increase was not quite good enough to see the company post a profit, however. Gross profit was US$198.3 million) and gross margin was 41.7 per cent, compared with 43.7 per cent in 2013. The company said the decrease in gross margin was mainly the result of continued sales promotion initiatives designed to increase market share.

It posted a net loss of RMB13.8 million (US$2.2 million) for 2014, compared to net income of RMB11.8 million ($1.9 million) in 2013.

There were signs of improvement in the latter part of the year, however: fourth quarter revenue rose 13.4 per cent to US$137 million and same store sales (the 1750 opened prior to December 31, 2012 and still trading two years later) by 14.2 per cent.

“The increase in revenue and same store sales was primarily attributable to in-store promotional initiatives and strengthened marketing efforts for pharmaceutical products,” the company said in a statement.

China Nepstar Chain Drugstore expanded its range of private label products to 2156 SKUs by the year’s end, which now account for 14.7 per cent of group revenue and 20.4 per cent of gross profit.

“Now that we have regained momentum in overall revenues and same store sales, we will turn our focus to improving income from operations through continued stringent expenses control and achieving more sustainable growth in sales going forward,” said Zhang. “Our goal is to expand our market share continuously by leveraging our nationwide network of quality retail drugstores, upgrading promotional campaigns and optimizing our product mix.”


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