This article first appeared in Corporate, The Edge Malaysia Weekly, on June 6 - 12, 2016.
GRANTED, the current economic environment is challenging but optical retail chain Focus Point Holdings Bhd does not seem to be slowing down. Instead, says its founder and president/CEO Datuk Liaw Choon Liang, the company is expanding aggressively.
Certainly, it takes an optimist to see opportunities rather than threats in an economic downturn.
In fact, it was at the peak of the 1997/98 Asian financial crisis that Liaw decided to venture out of Johor into the Klang Valley.
The first Focus Point outlet had opened for business in Muar, Johor, in 1989. Today, the group has 190 outlets across the country.
“The turning point for the group was during the 1997 economic crisis. We became more aggressive when everyone was quiet or shutting down. As a result, it was easy for us to get good locations in the shopping malls and to recruit talent,” Liaw tells The Edge.
Now, when the global economic climate has turned harsh, Liaw is planning to do what he had done in 1997/98 — seize the opportunity to expand. This year, he expects the group to spend RM10 million on opening 20 optical outlets locally.
“We opened eight outlets between January and May, so we have 12 more to go. Today, a number of retailers have slowed down [expansion] because the times are bad but I feel that when everyone is slowing down, we should be more aggressive,” Liaw comments.
The capital expenditure for each new operation was RM500,000, he adds.
Indeed, the new outlets are just part of a plan to grow the company’s core business.
Focus Point now produces spectacles under its own brand, Whoosh, and is strengthening it to cater for changing consumption patterns.
“In the last two years, everyone has been saying ‘budget, budget, budget’. Everyone has been cutting their expenses. So, we needed to look at a new business model. We started Whoosh in April last year and today, we already have 16 stores,” Liaw remarks.
“All this while, Focus Point only carried international brands such as Chanel, Armani and Gucci. But now, we have our very own brand. Its concept is simple. We make it affordable. A pair of good quality spectacles with lenses costs less than RM500.”
As the single largest shareholder with a 59.58% stake, Liaw is ambitious for Focus Point. He wants to extend its operations overseas, and hopes to use Whoosh as the springboard into foreign markets.
“Whoosh is our new baby. Hopefully, we can take this brand overseas. It is not easy to take Focus Point overseas because we are selling generic brands that the overseas markets have as well. There is no secret recipe. However, Whoosh is our own product, design, shape ... you cannot find it anywhere else,” he says.
Beside expanding the optical business, Liaw made a bold decision three years ago to diversify into the food and beverage (F&B) sector to boost the company’s growth.
“The difference between the two businesses is that F&B is easy to franchise because it has a concept. Our bakery, Komugi, is a Japanese concept and we have a secret recipe [to run the bakery] … so people are interested in investing in it,” says Liaw.
“Our master franchise holder in the Philippines will be opening its fourth outlet there soon and we just signed with a master franchise holder in Australia to open the first Komugi store in Melbourne this September.”
The group is now looking at franchise opportunities in China, he adds.
Focus Point charges a one-time franchise fee of US$250,000 to set up a Komugi outlet abroad and a monthly royalty fee of 6% of gross sales. At home, the one-time fee per outlet is RM150,000 while the monthly royalty fee is the same. Komugi’s first domestic franchise outlet opened in Kuching, Sarawak.
While Liaw believes there is a lot of potential in the bakery business, the group’s move into F&B has not been plain sailing. And it has eaten into Focus Point’s profits, he admits.
The group’s earnings have declined noticeably since its entry into F&B in its financial year ended Dec 31, 2013 (FY2013). Between FY2010 and FY2013, its net profit ranged from RM4.7 million to RM6.9 million. In FY2015, however, net profit increased just 9% year on year to RM1.2 million while revenue inched up 0.7% to RM154.6 million.
“We have restructured and restrategised the F&B business. Initially, we made some mistakes and as a result, we had to dispose of our restaurant business. Now, we want to focus on Komugi. There is high potential there. You see, Focus Point has been around for so many years but outside Malaysia, it is only present in Brunei.
“We just started three years ago in F&B and already, we are in two countries. And I believe there is more to come,” Liaw points out.
To better manage its overheads, Focus Point concentrates on kiosks. “We opened too big a shop in F&B, where the overheads are very high. So now, we focus on the kiosk concept ... it works better and the returns are higher because of lower overheads,” Liaw says, adding that the group has 13 Komugi outlets and kiosks.
However, the F&B business currently contributes less than 15% to Focus Point’s revenue while the optical business accounts for the rest. “The optical business is still very strong and generates most of our profits,” Liaw observes.
In terms of earnings, Focus Point does not have much to shout about. Since FY2013, its quarterly earnings have swung between profit and loss. In its first quarter ended March 31, 2016, net profit contracted 75% y-o-y to RM529,000 due to higher operating expenses.
Liaw admits that this is because the overall retail sentiment is still weak. “The first quarter was hit definitely compared with last year because last year, there were the pre-GST (Goods and Services Tax) sales. The first quarter last year was before the implementation of GST on April 1. [Business] should catch up by the second or third quarter. Overall, we are still positive and confident,” he says.
“Our industry is a necessity. People still need glasses.”