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Heavy dive into loss for CP Lotus

The Chinese arm of Thailand’s CP Lotus has suffered a significant reversal of fortune over the last six months.

From a profit of RMB 32.9 million (US$4.9 million), a net loss of RMB 63.9 million is expected for the six months ended June 30 by the hypermarket operator, listed in Hong Kong as CP Lotus Corporation.

Revenue fell by 3.2 per cent to RMB 5.32 billion, mainly because of a 6.5 per cent decline in same-store sales, cushioned by the revenue generated from five stores opened in the second half of last year.

Sales of non-food items continued to underperform. Sales of apparel, electronics, hardline and
personal care goods fell by about RMB 190.6 million, or 3.6 per cent of sales, while fresh-food sales grew 2.6 per cent at the expense of a lower margin.

The group owns 60 retail stores – 59 hypermarkets and one supermarket, with a total sales area of about 500,000 sqm. The group also has a shopping mall in Shantou.

During the period under review, a store was opened in Yangjiang, the 30th Lotus outlet in Guangdong province. While the Hefei store was closed in April 2016 because of property redevelopment, it is expected to reopen in October 2018.

Direct sourcing

In expanding its direct sourcing, the group was able to make more direct purchases of vegetables and fruit. The group continued to import more products such as wine, beverages, snacks, health supplements, kitchenware and groceries. Competitively priced house brands have been introduced, with the target of having house brands in three product categories by the end of the year.

In response to China relaxing its one-child policy and the impact of online retail, the group continued to review the allocation of sales space among different categories. More space has been made available for mother and babycare products, while sales space for electronics and apparel has been reduced.

To incentivise employees, the group launched a pilot responsibility and authorisation
project, linking the income of store employees to store performance, and allowing the management team to make decisions in response to the market situation, customer behaviours and competition.

CP Lotus says the rest of the year remains “very challenging”, particularly with the impact of online retailers, especially in the Shanghai area.

“We will continue to expand our retail network and expect to open four more stores by the end of the year.”

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