Parkson Retail net profit slumps 35.9% in 4Q

Business will remain difficult.

Parkson Retail sinks deeper into the red as net profit in 4Q14 and FY14 go down by 35.9% and 12.5% respectively, with the decline possibly due to weaker regional currencies against the SGD.

In a report by RHB OSK-DMG, it is expected that Parkson’s business conditions will remain difficult for the next few quarters, especially in its core Malaysian market.

RHB OSK-DMG adds that Parkson has a proven business model to ride this out, but RHB sees FY15 more as a year of consolidation.

Here’s more from OSK-DMG:

Negative SSSG in Malaysia and Vietnam. For FY14, its Malaysian operation saw a marginal 0.1% decline in same-store sales growth (SSSG), but still managed a 3% increase in PBT as Parkson achieved higher margins due to tighter cost and inventory control. Its Vietnam operation saw a 4.2% decline in SSSG, and swung into losses as a result. Indonesia, on the other hand, saw a 6% increase in SSSG but its PBT declined 49.5% on incubation of new stores.

We expect the operating environment for the group to remain negative heading into FY15. Consumer confidence remains weak in Malaysia. Pre-goods and services tax (GST) buying may bring some respite in the next two quarters, but will likely be negated by a weaker 2HFY15. Indonesian demand remains more resilient, but we note that competition remains keen and its substantial new stores will be a drag on PBT before they hit maturity.