New massage chairs fail to cure OSIM’s acutely strained profits

Earnings have been falling for four quarters.

OSIM’s new line of massage chairs have failed to aid its persistently strained profits, a report by DBS revealed.

DBS noted that the 24% year-on-year plunge in the group’s profits in Q2 was driven by slow sales in its core chair massage business, despite the launch of its new uMagic chair line.

“OSIM has now registered four consecutive quarters of y-o-y earnings decline, albeit at a slower pace. We have also observed declining inventory turnover or longer inventory days over past three consecutive quarters. OSIM’s revenue has been falling; the declines of 13% in 1Q and 2Q15 have been the deepest in around six years. We believe core chair sales have been weak due to subdued demand,” DBS said.

“New products and growth execution will now need to demonstrate immediate ability to reverse this trend as the headline revenue growth numbers are strongly suggesting  that outlook and demand is weak. We lower our store count and sales per store assumptions as both parameters have lagged our expectations. We also impute higher opex as we believe marketing expenses will increase due to uMagic’s change of marketing strategy,” DBS added.