What Investors Need to Know About Parkson Retail Asia Pte Ltd’s Latest Quarterly Earnings

Parkson Retail Asia Pte Ltd (SGX: O9E), a department store operator across cities in Malaysia, Vietnam, Indonesia, and Myanmar, released its first quarter results yesterday evening.

Financial highlights

For the three months ended 30 September 2014, gross sales proceeds (GSP) increased 1.7% year-on-year to S$280.7 million while revenue went up 1.2% to S$110 million. GSP represents the total sales proceeds from direct sales and concessionaire sales, consultancy and management service fees, and rental income. The better showing in GSP and revenue was due to contributions from seven new stores and three newly-renovated stores which were opened/re-opened during the financial year ended 30 June 2014 (FY2014).

Despite the slight top-line growth, Parkson Retail’s bottom-line suffered. Pre-tax profit for the quarter declined by 27.9% year-on-year to S$10.5 million due to losses incurred by the new stores in their gestation period. Negative same store sales (SSS) from the company’s Malaysia and Vietnam operations (more on this shortly) also contributed to the profit decline. On a same-store basis (“i.e. excluding the operating results of new stores and renovated stores for” the first quarter of FY2015), pre-tax profit had declined by 5.3% from S$14.6 million a year ago to S$13.9 million.

With the big slide in pre-tax profit, it’s no real surprise to see Parkson Retail’s net profit dropping by a wide margin of 33.1% to S$6.9 million.

Operational highlights

During the quarter, Parkson Retail’s GSP and revenue had actually decreased by 4.3% and 3.9%, respectively, on a same-store basis. In particular, Parkson Retail’s Malaysia and Vietnam operations were big reasons for the phenomenon. The two countries saw SSS declines of 4.4% and 5.5% respectively. SSS compares the sales of the stores that have been open for at least a year and the figure gives investors insight into the health of a retailer’s existing stores.

Financial strength

Despite the somewhat disappointing sales and profit figures, investors might take heart in the fact that Parkson Retail’s balance sheet remains strong. As of 30 September 2014, the firm had a cash balance of S$163.8 million with no debt. Three months ago, it had lesser cash (S$150.9 million) while carrying no debt too.

Future outlook

Parkson Retail commented in its earnings release that its “Malaysia and Indonesia operations may encounter some challenges in the next reporting quarter” while its Vietnam operations “is expected to remain difficult.” Management aims to overcome the challenges in Vietnam “by improving store productivity and prudent costs management.” It would be interesting for investors to observe how Parkson Retail’s Vietnam operations perform as time progresses.

Parkson Retail’s shares closed at S$0.89 on Thursday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.