Jun 06, 2016

    China's online stores eat into Parkson's profits


    DESPITE the encouraging revenue growth from its Chinese malls, Parkson Holdings continues to see its razor-thin margins cut further due to the cost of doing business in the world's most populous nation.

    On June 1, following its latest quarterly results, Parkson's share price fell to 82 sen (27 Singapore cents) per share, representing a 13-year low.

    With high overheads, sunk costs from new ventures, and stiff competition in both the physical and e-commerce spaces, the retail group could finish its full financial year in the red for the first time in 10 years, according to analysts.

    According to data by the National Bureau of Statistics in China, Chinese retail websites sold 3.88 trillion yuan (S$801.6 billion) worth of goods last year.

    Despite the seemingly large figure, total online sales make up only 12 per cent of total retail sales in China.

    Chinese e-commerce giants Alibaba and Tencent recorded net profit margins of above 20 per cent in their latest respective full-year results. In comparison, Parkson reported a net income margin of 4.6 per cent for its 2015 financial year while its subsidiary, Parkson Retail Group, fell into the red for the year.