Parkson 1Q net profit drops to seven-year low, weighed down by shrinking contribution from China

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KUALA LUMPUR (Nov 24): Parkson Holdings Bhd’s net profit shrank 34% to RM20.22 million in the first quarter ended Sept 30 – the lowest quarterly profit achieved in seven years.

The contribution from its China operation more than halved due to intensive competition.    

“The competition within the retail sector in China in particular the proliferation of e-commerce operation and the generally weak discretionary spending had continued to post a negative impact on Parkson China's same store sales (SSS) growth,” said Parkson in its financial results released today.

Parkson China reported a lower operating profit of RM16.28 million, from RM37.22 million in the previous corresponding quarter, on the back of the negative SSS growth of 4% and increased operating costs.

Operating profit from its retail segment, which makes up 95% of its revenue in 1QFY15, fell by 42% to RM40.3 million from RM69.9 million in the previous corresponding quarter. There was a marginal growth in revenue of 2% to RM839 million.

Property division contributed barely the remaining 5% of the retail group’s revenue.

Meanwhile, operating profit from Parkson’s retail operations at home fell 9.7% to RM26.81 million from RM29.7 million in 1QFY14 on weaker consumer sentiment.

“Locally, Parkson operations were affected by weaker consumer sentiments due to the rising cost of living and the Malaysian Central Bank's announcement on the hike in overnight policy rate in July 2014.

“Accordingly, Parkson Malaysia reported a negative SSS growth of 4% for the quarter under review,” it said.

Losses also widened in its Vietnam and Myanmar operations to RM3.13 million from RM1.50 million, recording a SSS contracted 5% as the trading environment in Vietnam remained “challenging” amid weak discretionary retail spending and stiff competition following significant increase of new retail players in the country.

“The group's performance is anticipated to improve in the next quarter in view of the coming year-end festivities and holiday seasons,” it said.

Parkson share price fell four sen or 1.6% at RM2.48 today, giving it a market capitalization of RM2.7 billion. Its share price is down by 15.1% from RM2.92 three months ago.