Prospects dim for turnaround at Parkson
Stiff competition and slowing economic growth cited as concerns after profit slumps 38 per cent
Parkson Retail, the mainland's biggest operator of department stores, faces bleak prospects for a turnaround this year after reporting a 38 per cent slump in first-half net profit, analysts say.
The firm earned 3.24 billion yuan (HK$4.1 billion) for the six months, falling short of a consensus forecast of 3.51 billion yuan compiled by Bloomberg.
It is unlikely Parkson's profits will recover in the second half, owing to intense competition in the mid-range retail sector, especially from the e-commerce segment, and slower growth on the mainland, analysts say.
"Probably not in the next six months, because they're doing quite a bit of renovations, and in terms of position, competition is stiffer in medium ware," said UOB-Kay Hian analyst Renee Tai.
At some of the existing stores, they’re adding what we call ‘added services’
"They focus on footwear and apparel, so we could see some more competition from online retailers in China or even overseas.
"They are also trying to reposition as a more niche player. One of the problems is that they are set up like an individual store, and the trend we're seeing in China is that people like shopping malls. These offer a lot more: you have a theatre and places to eat. At some of [Parkson's] existing stores, they're adding what we call 'added services'."