SINGAPORE - Lower gross margin and higher operating expenses dragged down third-quarter earnings for traditional Chinese medicine retailer Eu Yan Sang International.

The group posted a net profit of $5.45 million for the three months to March 31, 38 per cent down from the $8.79 million in the same period last year.

Revenue dropped by a marginal 1 per cent to $110.4 million, "cushioned by better retail sales in Singapore, Malaysia and Australia", said Eu Yan Sang in a statement on Tuesday.

The retail environment in Hong Kong "remains challenging", it noted.

Gross margin for the quarter under review dipped 2.6 per cent, due mainly to the impact of sales mix and longer lead time to Chinese New Year.

Net profit for the nine months to March 31 fell 39 per cent to $8.16 million, while revenue dipped by a marginal 1 per cent to $278.2 million.

Earnings per share for the third quarter dropped to 1.22 cents, down from the 1.98 cents previously. Net asset value per share came in at 36.8 cents as at March 31, higher than the 35.4 cents as at June 30 last year.

"Despite the challenging retail environment in Hong Kong contributed by a slowdown of spending and visitation restrictions imposed on mainland Chinese to Hong Kong, most of our key markets have shown resilience," said group chief executive Richard Eu, pointing to the Singapore, Malaysia and Australia markets, which have reported revenue growth.

"We see long-term opportunities especially in rising health awareness as consumers are becoming more discerning and better educated about wellness issues and are actively seeking for healthy food and natural health remedies.

"This is a space where we differentiate ourselves from others, where consumers understand product quality over pricing. ... In addition, our wellness offerings are easily accessible through ongoing introduction of new, exciting products and the extension of our wholesale channels," he said.

Eu Yan Sang shares closed half a cent up at 67 cents on Tuesday.