Parkson Retail Asia Ltd’s Latest Earnings: Is the Worst Finally Over?

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Parkson Retail Asia Ltd (SGX: O9E) announced its fiscal third-quarter results on Wednesday.

As a quick introduction, Parkson Retail Asia is a retailer with a focus on department stores. Currently, it has 66 stores (including one supermarket) that are scattered across four Asian countries in Malaysia, Vietnam, Indonesia, and Myanmar. These stores, which are mostly under the Parkson brand, have a collective retail space of 685,000 square metres.

From the latest quarterly report, it seems that the company might finally be seeing some growth ahead after a few years of seeing its profit decline. Here are some of the highlights from Parkson Retail Asia’s latest earnings release.

Financial highlights

Gross sales proceeds improved 9.7% year on year to S$295.9 million for the third-quarter of fiscal year ending 30 June 2015 (FY2015). That translated to a 9.2% climb in revenue to S$116.6 million for the quarter.

As the growth in expenses was better-aligned with the increase in revenue, Parkson Retail Asia’s profit before tax for the quarter ended at S$12.1 million, an 8.4% gain when pitted against the same quarter a year ago. The company ended the quarter with a net profit attributable to owners of S$8.0 million, a 5.5% year over year climb.

The cash flow picture also looks a lot brighter for Parkson Retail Asia. The company ended its fiscal third-quarter with S$12.5 million in operating cash flow, S$12.8 million in capital expenditures, and thus –S$0.3 million in free cash flow (free cash flow is obtained by subtracting capital expenditures from operating cash flow); a year ago, Parkson Retail Asia generated –S$23.8 million in operating cash flow and had spent S$12.7 million in capital expenditures, thus giving rise to –S$36.5 million in free cash flow.

Parkson Retail Asia ended 31 March 2015 witha very strong balance sheet with S$171.5 million in cash and no debt. It should be noted however that the company operates mainly through concessional sales and because of that, its trade and other payables remain high at S$152.6 million. The high cash balance that Parkson Retail Asia has is mostly needed to offset the aforementioned payables.

For the nine months ending 31 March 2015, Parkson Retail Asia’s net profit attributable to shareholders saw a 20.1% year over year decline to S$25 million. This was mainly due to the losses suffered in its Vietnam stores and some of its new stores.

Operational highlights

When looking at retail companies, the same store sales growth (SSSG) metric is an important one to track as it looks at the growth in revenue that a retail firm has achieved after stripping out new store openings.

Parkson Retail Asia saw positive SSSG in most of its geographical markets except for Vietnam, where SSSG clocked in at -2.1%. The company, which has nine stores in Vietnam, saw some growth in its stores in the southern part of the country, but that was offset by large declines in the firm’s northern business in Hanoi and Hai Phong.

The departmental store operator’s Malaysia business had achieved SSSG of 8% mainly due to consumers shopping more just before the implementation of a Goods and Services Tax (GST) in the country. Malaysia is currently Parkson Retail Asia’s largest market with 42 stores country-wide.

Parkson Retail Asia’s 14 stores in Indonesia also had a strong showing as they recorded SSSG of 6.9%. Strong consumer sentiment was attributed by management for the result.

Myanmar is Parkson Retail Asia’s smallest market at the moment with one store. But, that lone store had a good quarter with a SSSG of 12.7% as its business has begun to ramp up following its first year in operation.

Foolish Takeaway

In all, it appears that the worst might be over for Parkson Retail Asia. In fact the company is planning to continue expanding its store count for the rest of FY2015 and FY2016. The company plans to open one new store in the fourth-quarter of FY2015 and eight in FY2016. One of the new store openings in FY2016 will be in Phnom Penh, Cambodia, a new geographical market for the firm.

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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 writer Stanley Lim does not own any companies mentioned above.