Eu Yan Sang swings to Q4 loss from weaker sales in Hong Kong, Malaysia

Traditional Chinese medicine retailer Eu Yan Sang International reported a net loss of $3.6 million for the fourth quarter ended June 30, 2015.
Traditional Chinese medicine retailer Eu Yan Sang International reported a net loss of $3.6 million for the fourth quarter ended June 30, 2015.PHOTO: EU YAN SANG

SINGAPORE - Traditional Chinese medicine retailer Eu Yan Sang International reported on Wednesday a net loss of $3.6 million for the fourth quarter ended June 30, compared to a net profit of $1.61 million for the year-ago period.

For the full year, net profit plunged 70 per cent to $4.56 million from $15.03 million a year ago.

For the fourth quarter, revenue fell 15 per cent to $72.25 million, while full-year revenue dropped 4 per cent to $350.41 million.

The company said the weaker sales were laregely due to challenges in the macro environment for Hong Kong and Malaysia. The latter implemented a new goods and services tax of 6 per cent on April 1, 2015.

In contrast, Singapore's revenue for the fourth quarter and the full year were higher by 5 per cent and 4 per cent respectively, mainly driven by sales of new products and effective consumer campaigns. Australia also saw a surge in revenue.

The group's retail network comprised 252 company-operated outlets and 25 franchise outlets by end June. During the year, it added a total of 13 company-operated outlets to the retail network in Australia, Malaysia and Hong Kong. It closed eight company-operated outlets in Singapore, China and Macau, and there was a net reduction of seven franchise outlets in Australia.

Eu Yan Sang said it remains cautious on its business outlook as macro-environmental issues and challenges in Hong Kong and Malaysia will continue to persist, which may cause significant impact on its future performance.

It said store rationalisation would continue in China as it focused on online and wholesale channels.

"While the travel restrictions to Hong Kong imposed on mainland Chinese have affected parallel traders coming to Hong Kong to purchase Eu Yan Sang products, it has encouraged sales of our products at online sales platforms and at cross border, tax free outlets," the company said.

Operations in Australia are on track to show a turnaround by FY2016 through double digit same store sales growth. To accelerate the turnaround in Australia, the group intends to acquire existing businesses to strengthen its existing network in Australia.

Singapore will continue to demonstrate incremental improvements and provide positive revenue growth. This will help cushion the overall reduction in group revenues from Hong Kong and Malaysia, it added.

Overall, the group expects the business environment in the next 12 months to be difficult. In view of this, it will rationalise weak-performing retail outlets, while continuing to focus on improving efficiency of back-office operations through the use of technology.

"With more emphasis on the wholesale and e-commerce channels to furthering growth opportunities, the group expects to minimise impact from the negative operating environment," it said.