Sales rebound as Parkson Retail transformation plan pays off

With a rebound in same-store sales, lifestyle retailer Parkson Retail Group had a 1.9 per cent increase in half-year operating revenue to RMB2.3 billion (US$ 344.9 million).

The figures reflect the impact of the transformation plan under which the company is redefining its image and spinning categories off into stand-alone concepts.

Second-quarter same-store sales grew by 2.4 per cent, following a 2.2 per cent drop in the first quarter, according to its unaudited interim results.

Total operating revenue for the half-year rose by 1.9 per cent to RMB2.3 billion, leading to an operating profit of RMB70.6 million – an increase of RMB122 million from a loss of RMB51.4 million for the same period last year.

Total merchandise sales totalled about RMB6.5 billion while concessionaire sales contributed about 84.8 per cent. Direct sales contributed the balance of 15.2 per cent.

The cosmetics and accessories category became the biggest contributor (46.2 per cent) to first-half sales, with the previous leader, fashion and apparel, contributing about 45.1 per cent. Groceries and perishables contributed about 5.4 per cent, while household and electrical about 3.2 per cent.

Total operating revenues of the group increased 1.9 per cent to RMB2.3 billion, mainly attributable to a RMB14.2 million boost in rental income from the Qingdao Lion Mall, plus a RMB19.3 million tax refund.

Business revitalised

Parkson says its business was revitalised during the period thanks to progress with its transformation plans. While China’s economy was stable, the retail market was still challenging and competitive but with positive signs of a rebound.

There was a 4.3 per cent decline in total gross sales proceeds at RMB8.1 billion, including value-added tax. This was mainly attributable to four stores being closed during the half.

“Over the past few years, the Chinese retail market has seen an unprecedented evolution,” says Parkson. This presented one of its most challenging periods.

“We came to China with a department store concept 23 years ago to serve the Chinese middle class which was looking for quality products. Today, we are still serving the fast-growing Chinese middle class, whose focus has shifted to comfort and healthier lifestyles. To ensure we continue to realise our mission, we have made every effort to evolve and adjust by launching multiple retail formats, improving our merchandise and service portfolio, and enhancing our operations and portfolio management.

“We have refined specific business unit operations, identifying cosmetics, F&B and supermarkets as key units to be developed as standalone businesses. These units can run both within our network of department stores and outside the Parkson ecosystem.

“A good example is Parkson Beauty, which we will launch as a specialty standalone concept store in Changsha International Financial Square, Hunan province. This concept was specifically designed to target customers who prefer to shop offline and enjoy lifestyle experiences with fashionable products and personalised services. Parkson Beauty will showcase our cosmetics brands and help us to capitalise on the segment’s growth. It is one of the most resilient retail segments against market headwind.”

Move into malls

The group launched Qingdao Lion Mall last year, marking its move into the shopping mall segment. The mall offers more than 200 brands with Parkson’s department store, a supermarket, fashion labels and F&B. “There is high occupancy, an excellent tenant mix, innovative marketing campaigns and efficient management.”

Meanwhile, the group has been contacted by commercial property developers with the first managed shopping mall expected to open this year.

In May, the group launched its second Parkson Newcore Citymall, in Nanchang, following the success of the Shanghai Newcore Citymall and extending its partnership with E-Land Group to offer Korean-themed merchandise and lifestyle elements. “This off-price city-mall format is an example of our efforts to attract young and fashionable consumers, with more Citymall concept stores to be launched.”

The group’s first gourmet supermarket, the Parkson Supermarket, was launched in the Qingdao
Lion Mall in September last year. “This Parkson-branded standalone supermarket offers a broad variety of premium local and imported products, and caters for emerging middle-class and family consumers who are looking for quality lifestyle choices.”

A third supermarket will be launched before year’s end.

“In the F&B segment, our strategy is to build a brand, gain recognition then incorporate it with our other retail formats to create synergy. The third Hogan Bakery outlet was opened in Shanghai Parkson after gaining popularity, and the group will speed up expansion of this brand, opening more stores in Shanghai and expanding to other provinces.”

Department stores will also open in Changsha and Chenzhou this year.

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