SINGAPORE - Electrical, IT and furniture retailer Courts Asia stumbled in the second quarter, as profit margins in Singapore were hurt by sales promotions undertaken earlier this year.
Net profit fell 75 per cent to $1.51 million for the three months to Sept 30 from $5.98 million a year earlier.
Gross profit was down 6 per cent year-on-year, with margins affected by ongoing renovation sale promotions in its Singapore flagship Courts Megastore, a drop in credit sales in Singapore and Malaysia, as well as an increase in impairment costs.
Revenue, however, dipped just 1.4 per cent year-on-year to $176.45 million.
"The retail landscape has been challenging and uncertain across our operating markets," said executive director and group chief executive Terence O'Connor.
"Whilst topline performance held steady, our bottomline took a short-term impact from lower margins this quarter mainly due to ongoing renovation sale promotions at our Megastore and a dip in credit sales."
Earnings per share for the period was 0.29 cents, down from 1.15 cents the year before.
The new Courts Megastore - said to be an integral part of the group's S$10 million plan to rejuvenate its store network in Singapore - is due to officially open on Nov 11.
"To clearly differentiate ourselves in the market, our team has collectively curated a whole new in-store experience that is set to be the 'best practice' within the industry," Dr O'Connor said.
In Malaysia, Courts Asia intends to focus on driving profitability for existing stores before expanding in the country, in view of the prolonged weak consumer climate and legislative changes expected in the near to medium term there.
"The retail environment in Malaysia remains soft in the short to medium term. With the Malaysian business under pressure due to the challenging retail outlook and upcoming legislative changes in 2018, we decided to pull back on our expansion ambition, and focus our efforts in driving profitability in our existing stores," Dr O'Connor said.
The group is preparing for the impending legislative change in Malaysia - which will see interest rates being capped at 15 per cent a year from January 2018 under the Consumer Protection (Credit Sale) Regulations 2017 - by reviewing new revenue streams and working to drive down operating costs.
"We have undertaken a cost-efficiency exercise to reduce the operating costs which included right-sizing the workforce to the business. Moving forward, it is imperative that we continue to keep a sharp focus on increasing productivity and controlling costs," Dr O'Connor said.