Mainland department store operator Parkson Retail Group said full year profit dropped 33.5 per cent, dragged down by the costs of disposing old underperforming stores as it attempts to transform itself into a mall-like lifestyle experience. “You can sense that the challenges that we face are unprecedented,” chief executive Shaun Chong Sui Hiong said. As a sector, department stores are being threatened by both e-commerce players which are less capital intensive and can pass savings onto consumers and malls which offer newer and more modern entertainment and lifestyle facilities. Profit for the year ended December was 235 million yuan while total gross sales declined by 4.2 per cent to 19,499.4 million yuan. The group closed four underperforming stores incurring one-off provisions of 105.1 million yuan. Excluding this, profit declined 3.8 per cent compared to last year. Same stores sales growth for the year declined 7.1 per cent year on year. In the same period, it opened five new stores in second tier cities and made its first shopping mall acquisition in Qingdao, expected to be launched in the fourth quarter of 2015. It expects to spend 300 to 400 million yuan refurbishing old stores and opening new ones. Despite the challenging environment, Chong said the firm would weather the storm. “Parkson has been in China for 21 years. We were one of the pioneers who started this concessionaire model. We have gone through very difficult periods in this industry: 1997 financial meltdown, SARS and another financial meltdown in 2008. And now, for the last three years, people are talking about the consumers migrating to shopping malls, ecommerce, duty free shops and overseas shopping,” he said. “As a true national department store chain, we have 60 stores across 36 cities, we stand a very good chance to transform and make an impact in this industry by launching these strategies…We try to introduce a lot of fun elements. This is also shared by our competitors which is to make retail fun again,” Chong said. Parkson has made some headway by launching its own website and exploring omnichannel retailing. It is rolling out a VIP membership club to encourage brand loyalty. Last week, it announced it had entered a 40 million yuan joint venture agreement with AUM Hospitality to develop its food and beverage offerings. AUMH operates 12 brands in Asia including concepts American burger chain Johnny Rockets and The Library Coffee Bar. A dividend of 0.01 yuan per share was proposed. Shares fell 2.36 per cent to HK$1.73 underperforming the benchmark Hang Seng Index which rose 0.44 per cent.