The 759 Store parent company has reported a disappointing result, despite increased sales.
While revenue edged up about 1.5 per cent for the latest fiscal year of grocery group CEC International Holdings, it had a consolidated loss of $29.7 million following last year’s $27.7 million profit.
It revenue edged up from HK$2.4 billion (US$312.3 million) last year to HK$2.46 billion, and for the year ended April 30, its consolidated gross profit was $821.4 million, up 6.5 per cent from the previous year. The consolidated gross profit margin was 33.4 per cent, up by 1.6
points.
CEC says the increases were mainly driven by the growth of its retail business.
Revenue from its 759 Store accounted for 93 per cent (88 per cent the previous year) of total revenue, while the share of its electronic components manufacturing business dropped to about 7 per cent from 12 per cent.
CEC says its founder has foreseen considerable adjustment to Hong Kong’s economy after years of prosperity and growth, and believes the group should grasp the opportunities to consolidate the market position and operational scale of 759 Store.
The company should adhere to its self-import model of high flow rate and “quick turnover with lower margin” policy, he says, and also increase the proportion of daily necessities that are immune to economic fluctuations, such as food groceries (oil, rice, noodles), frozen meats and seafood, and personal-care products.
Expectations not met
As at April 30, the group had 271 stores (not including co-operative shops), up 9.3 per cent from 248 last year. Segment revenue was $2.28 billion, up about 6.8 per cent.
“Nevertheless, the growth was unable to fulfill the board’s expectations in terms of magnitude,” says the company. In fact, for the Christmas and the Lunar New Year period, because of the perceived abrupt downturn in the market, the founder decided to stop selling holiday products.
During the year, the group rented a warehouse to cope with the logistical needs arising from the planned expansion in the food groceries category.
The group adopted the model of parallel imports, enabling 759 store to introduce a wider variety of products.
In April, the group opened up its self-importing channel for 100 Per Cent Pure Thai Hom Mali Rice and expanded its rice warehouse.
About 23,000 varieties of merchandise were sold during the year, compared with about 23,500 last year. The weighting of food groceries increased to 25 per cent from 13 per cent. Products were imported from 61 countries and regions, with Japan the main supplier at 39 per cent weighting.
Apart from 759 Store, the group has themed specialty shops, including 759 Kawaii/KawaiiLand, 759 Store Frozen Market, 759 Store Household Market/Kaguya, 759 Skyland and 759 Shinguya.
Looking ahead, the group will focus its retail business on the three main brands, 759 Store, 759 Kawaii/KawaiiLand for personal-care products, cosmetics and fashion gadgets, and 759 Cart Noodle, as a long-term tentative development in the catering industry.