Parkson Retail Group Limited (“Parkson” or the “Company”, with its subsidiaries collectively referred as the “Group”, HKEx stock code: 3368.HK), the leading nationwide lifestyle concept retailer in China, today announces the Group’s interim results for the six months ended 30 June 2020 (“Reviewed Period”).
During the Reviewed Period, the Global market and China’s economy have continued to face several challenges due to the uncertainties surrounded the world economic environment. The Group recorded total gross sales proceeds (“GSP”) of RMB4,896.3 million inclusive of value added tax, representing a decline of 34.7% as compared with the same period of last year, which was mainly due to the sales decline in same store sales(“SSS”). SSS in the Review Period decreased by 31.4%, reflecting the continued slowdown of Chinese economy and the impact from COVID-19. In the Review Period, the Group’s profit from operations decreased by 72.8% year-on-year to RMB97.2 million. Some department stores of Group have also been affected by COVID-19 control measures inevitably, making the Group’s overall business performance in the first half of the year less well than that of the same period last year. The Group has adopted several cost-control measures and continued to diversify its business development by exploring various operation models to broaden its income sources, in order to drive the Group’s long term and sustainable development.
Expand Retail Portfolio with a Flexible and Diverse Strategy
Facing the continuous challenges of market changes and fierce competition, Parkson insists in innovated revolution and expands its retail portfolio with a flexible and diverse strategy. The Group believes that its tactics of “Multiple Stores in a City” and “Differentiated Market Positioning” can help manage Parkson’s department stores effectively and reach more customers at different consumption levels, with consumption habits. Hence, the Group can gain more market share in the long run.
The Group opened a new Parkson store in Nanchang City, Jiangxi Province – Nanchang Bayiguan Store in January 2020. The store is next to the Nanchang Zhongshan Road Store. The differentiated market positioning and synergies created by the two stores can fully demonstrate the Group’s strong advantages in promoting diversified retail and strategic market expanding.
In June 2020, the Group signed a lease agreement with Wuzhou Sankee Investment Co., Ltd. through its wholly-owned subsidiary, Nanning Brilliant Parkson Commercial Co., Ltd., to lease the first to fourth floors above ground level of Sunshine 100 Sankee City, Changzhou District, Wuzhou City, to open a new Parkson store. Wuzhou Sankee Parkson Store will be the fourth store of the Group setup in Guangxi Zhuang Autonomous Region, and is scheduled to open in the coming year. The preparation of Wuzhou Sankee Parkson Store is in line with the Group’s development strategy in the Guangxi Zhuang Autonomous Region. It is expected that the opening of the store will help the Group to further expand its business in the region.
In addition, the Group’s second department store in Datong City, Shanxi Province is expected to serve the public officially in the third quarter of 2020. The store will operate as a “department store and shopping mall complex”, so as to enrich the retail portfolio of the property. The preparation work of the store in Tongren City, Guizhou Province is proceeding actively and is expected to open in the third quarter of 2020.
Other than expanding the Group’s own stores, it is also actively looking for new business partners to expand the Parkson brand through a strong alliance. In March 2020, the Group cooperated with Jinjin Changfa Group, a well-known commercial brand in Suzhou City, Jiangsu Province, to comprehensively upgrade and renovate Suzhou Changfa Commercial Building, which has a history of 25 years and is located in the core business district of Gusu District, Suzhou City. The project is expected to be launched in the fourth quarter of 2020 with a new outlook of “Parkson Changfa Hui”, which will integrate leading fashion lifestyle retail concepts and Suzhou lifestyle, to meet the needs of different consumer groups. The cooperation marks that the Group has stepped into the core market of Suzhou City. The Group believes that, with the strong advantages of both Parkson and Jinjin Changfa Group in commercial retail and market reputation, “Parkson Changfa Hui” will become a new benchmark for “Business, Tourism and Culture” in Gusu District.
Promote Sustainable Development with Multi-business Portfolio
The Group embraces both a flexible and effective business layout, as well as high quality products and services for its success and long-term continuous development. Over the years, the Group is devoted to continuously attract new and regular customers with diversified product combinations and optimizing consumption experiences for customers. Therefore, the Group has been actively expanding its product categories with diversified and quality products in order to satisfy consumers’ demands.
Besides, for product portfolio expansion, the Group has maintained a keen insight into the younger generation’s consumption habits and preferences since its fashion and beauty segments were developed. With the information and knowledge accumulated, the Group then implemented targeted development strategies for these two segments, such as introducing more international beauty brands and carrying out a variety of operation, leading the two business segments to achieve stable development and continuously gain customers’ favour and support. Especially for the beauty segment, which was unavoidably affected by COVID-19 to some extent, has recovered quickly after the epidemic by taking advantage of Group’s timely adjustment on business strategies.
The Group flexibly applies the “O2O New Retail Strategies”, by integrating the online and offline sales channels. By promoting beauty products through webcasting, the Group has driven offline sales to grow steadily, among which, the Group’s concept store Parkson Beauty has recorded stable sales growth. In the future, our Group will continue to promote its brand image and popularity through different marketing promotions, so as to progressively expand the Group’s market share in the fashion and beauty segments.
For more efficient use of resources, the Group has been adjusting its Fuxingmen Parkson Store in Beijing since the second half of 2019 and plans to convert the North Building, the Group’s self-owned properties, into office building for rental. During the Review Period, the Group continued to advance the renovation project and it is expected to enter into lease agreements with office tenants by the end of 2020, with the renovation work estimated to be finished in the first quarter of 2021. Geographically, Beijing Fuxingmen Parkson Store is located in Beijing Financial Street, which is the centre of Beijing and surrounded by a number of office buildings. The Group believes that, as part of Beijing’s financial street, the North Building of Fuxingmen Store can meet the numerous office rental demand in the region and is expected to generate stable rental income for the Group.
Strengthen Online and Social Network Services to Improve Customer Experience
With the development of Internet technology, as well as the accelerating innovation of retail formats, the “Online + Offline” new retail mode is favored by major retailers. Especially under the influence of COVID-19, offline consumption has been impacted greatly. However, the situation has accelerated the development of online retail sales. According to the data released by China’s National Bureau of Statistics recently, in the first six months of 2020, online retail sales of physical goods increased by 14.3% year-on-year, accounting for 25.2% of the total retail sales of consumer goods.
As a leading fashion lifestyle retailer in China, the Group is striving to seize the new opportunities brought by e-commerce and improve its “Online + Offline” new sales mode actively. The Group has taken various measures to stimulate consumption and drive the growth of offline retail business through the promotions on various online channels, including Parkson’s official Wechat account and mobile shopping mini-program, so as to improve customers’ enthusiasm for consumption. At the same time, the Group took this opportunity to attract more customers to visit Parkson stores for better shopping experience.
Parkson’s management commented, “Recently, China’s overall consumption mode has upgraded to high-quality consumption, while offline consumption has upgraded to ‘Online + Offline’ consumption. We believe that retail sales will remain one of the key growth drivers of China’s economy. China’s retail market is expected to recover gradually and residents’ desire to go out for consumption has also picked up steadily due to the effective control of COVID-19 by the Chinese government and the implementation of a number of measures to encourage enterprises to resume production and to stimulate residents’ consumption. In view of this, the Group remains optimistic about the overall retail market prospect in the second half of the year.”
“We will continue to improve the product portfolio for Parkson’s retail stores, so as to provide customers with more attractive and high-quality products. Meanwhile, Parkson will strengthen its online promotion to attract more customers to Parkson’s offline stores. Hence, we will vigorously develop ‘O2O New Retail Strategy’ and the related projects, strengthen the integration of online and offline retail sales, and effectively manage the marketing projects and personalize customer service through the new social media network and VIP membership management to meet the changes in the retail industry, satisfy the market demand and seize more business opportunities.
Furthermore, in the face of macroeconomic instability, the Group is actively looking for different business partners to explore new business opportunities, so as to diversify the Group’s business portfolio and solidify Parkson’s position as a leading lifestyle retailer in China. We believe that the Group will be able to achieve stable performance amid the challenging market environment and create long-term value for its shareholders, by virtue of the Group’s high-quality services in China’s retail market, diversified product portfolio and innovative business model combining diversified retail formats.”
About Parkson Retail Group Limited
Parkson Retail Group Limited (“Parkson”) is a leading nationwide lifestyle retail operator in China. As of 30 June 2020, the Group operated and managed 39 Parkson stores (including concept stores “Parkson Beauty”), 1 Lion Mall, 2 Parkson Newcore City Malls, supermarkets, fashion and food & beverage outlets, in 28 major cities.
With over two decades of retail experience in China, Parkson understands market developments and consumer demand. The Group incorporates shopping, dining and entertainment elements, within a combination of offline and online channels to cater to young and middle-to upper-middle-income consumers.