This article first appeared in The Edge Financial Daily on August 28, 2017

KUALA LUMPUR: Tomei Consolidated Bhd is closing down non-performing stores in a bid to stay profitable. The jewellery designer and manufacturer has shut down four outlets so far this year amid a realignment of its business strategy, which includes the continuous assessment of every store.

“We showed some results in our direction [to] continue closing down our non-performing outlets, to re-strategising our brand, which we will continue to do so for the next few years,” said managing director Datuk Ng Yih Pyng.

Other than closure of non-performing stores, Tomei will also focus on efficiency, introducing appealing products to customers, and repositioning its brand.

“We closed some of [our stores] in the hypermarkets because it’s not the positioning that Tomei wants to be perceived,” Ng told The Edge Financial Daily. “We also upgraded some of our stores to make it more appealing to the market.”

Despite shutting down stores, Ng shared that Tomei will be cautious and selective in opening new and bigger outlets. So far this year, it has opened two stores.

The group, said Ng, has decided that its outlets should have a bigger space in order to better display its products and to create ambience.

He added that his team has been studying the flow of people after the recent commencement of the mass rapid transit service in the Klang Valley.

For the second quarter ended June 30, 2017, Tomei’s net profit jumped more than 11 times to RM5.64 million or 4.07 sen per share, from RM485,000 or 0.35 sen per share a year ago, on higher revenue.

Quarterly revenue rose 57.9% to RM169.17 million from RM107.14 million, contributed by higher consumer demand.

Ng said the rise in earnings was partly due to the group’s investment in gold bars and higher exports as a result of the weaker ringgit. He pointed out that the volatility of the ringgit’s value had led to the increased interest in gold.

The rising price of gold had resulted in better margins for the group, said Ng. The gold price stood at US$1,287.36 (RM5,497.03) per ounce at the end of last week, compared with US$1,158.19 at the end of 2016.

For the first half of the year, Tomei’s net profit surged 156.45% to RM9.96 million, from RM3.88 million in the prior corresponding period. Revenue rose 45.35% to RM334.85 million from RM230.38 million.

Tomei returned to the black in the previous year ended Dec 31, 2016 (FY16) with a net profit of RM4.69 million, after a net loss of RM1.72 million in FY15, mainly due to the benefits derived from its rationalisation efforts.

"I admit we did badly [in the previous two years] partly because … gold prices fell after 2013,” said Ng. “It took us about two-and-a-half years to get everything sorted out, and I believe that Tomei is in a slightly better shape now.”

Meanwhile, after closing down its two remaining outlets in Vietnam, Tomei is left with just its manufacturing business there. However, Ng said the group is keen to remain in the Vietnamese market and is looking for the right location to open new stores.

He said that as the recruitment of foreign workers is getting difficult in Malaysia, Tomei should focus on building up its production force in Vietnam.

“Yes, we are using a lot of automation, but there are a lot of things that [still] require handcraft. So, we still need the labour [force],” he said.

Ng also shared that as part of Tomei’s strategy, the group has introduced many new products in the market.

At the end of July, the group launched an exclusive pure gold wedding collection, which has been “very successful”, especially in China and Hong Kong, said Ng.

This 24 karat gold product is currently available at only 10 outlets in Malaysia, he added.

“A lot of outlets want this product in their stores,” said Ng, adding that Tomei will be monitoring the sales of the collection for another three months before making a decision.

Ng also said that the group’s Hello Kitty collection remains popular. “The product that will appeal to children will forever be there. In today's culture there's lot of gift-giving,” said Ng.

He explained that in the old days, people used to buy simple chains with two bells for their newborns, but now they like more sophisticated designs.

“The good thing about Hello Kitty is that it appeals to all races,” he added.

Looking forward, Ng said he is cautiously optimistic about the rest of 2017 as he believes that the second half will continue to be challenging.

Interestingly, rather than comparing Tomei with other jewellery retailers, Ng said he sees more competition from smartphones.

“Now, new models of smartphones are being launched yearly and the younger generations prefer smartphones over jewellery. So that’s why we have to come out with different products that will appeal to the customers,” he said.

Ng said Tomei is also exploring more opportunities in the e-business sector. "Currently, we're also selling our products on Lazada and other platforms,” he said.

Year to date, Tomei’s share price had risen as much as 92.5% to 77 sen last Friday from 40 sen. The group has a market capitalisation of RM106.03 million.