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Profit slowdown hits Parkson

(China Daily/Agencies)
Updated: 2010-02-23 10:17

Shoppers enter a Parkson store in Beijing. The retailer said net income rose 8.3 percent to 911 million yuan last year. [Agencies]

Department store chain's shares fall on disappointing earnings

HONG KONG: Parkson Retail Group Ltd fell in Hong Kong trading, reversing earlier gains, after the Beijing-based department store chain posted the slowest profit growth in at least six years.

Net income rose 8.3 percent to 911 million yuan ($133 million), according to a filing to the Hong Kong Stock Exchange yesterday, missing the average estimate of 955 million yuan of 11 analysts surveyed by Bloomberg.

Parkson fell 6 percent to close at HK$11.18 in Hong Kong trading.

Same-store sales growth for the retailer controlled by Malaysia's Lion Group slowed after China's economy expanded at its slowest pace in almost a decade in the first half of last year, the retailer said yesterday. Economic growth momentum in the mainland started to pick up in the third and fourth quarters, it said.

"Retail sales growth is recovering but it's not a huge leap," Nicolas Wang, an analyst at Daiwa Institute of Research Ltd in Hong Kong said before the earnings announcement. "Retailers have continued to offer discounts to spur consumer spending and Parkson is no exception."

Parkson has declined 16.5 percent this year, compared with a 7 percent drop for the benchmark Hang Seng Index.

Same-store sales growth slowed to 7.5 percent from 12.1 percent, the retailer said. Comparable sales strip out the effects of newly opened outlets.

The company added 11 percent to its retail space last year, missing a target of 15 percent after a delay in the opening of the Suntrans shopping mall in Beijing. Parkson said it plans to open the mall in the first half of this year.

Parkson plans to increase retail space in the mainland by 15 percent this year as it adds cosmetics and accessories brands to lure customers. The company, which opened its first store in Beijing in 1994, may add as many as six in the capital and other cities, Managing Director Alfred Cheng said on Jan 12.

Revenue rose 10.5 percent to 3.91 billion yuan in 2009, Parkson said. Earnings per share rose to 0.325 yuan from 0.3 yuan a year earlier.

"The rebound in same-store sales growth won't be strong but is improving on a quarterly basis," said Daiwa's Wang, who recommends holding Parkson stock.

The company proposed a final dividend of 0.10 yuan a share, compared with 0.085 yuan a year earlier.

China's economy "is on the right track to a sustainable recovery of its growth but the road for further recovery of its growth is expected to be bumpy and challenging", Parkson said.

"Overcapacity in selected industries, asset bubbles and worry on uncontrollable inflation will inevitably lead to adjustment in its fiscal policies and tightening of its monetary policies which will pose challenges and uncertainties."