Pou Sheng, the Chinese retail subsidiary of Yue Yuen Industrial Holding, said a “further slowdown in sales momentum in the mainland China market” is expected to cause sales to decline 8.3 percent in the first half, to RMB 9.16 billion ($1.28 bn). Profits are expected to decline 44.1 percent to RMB 187.6 million.
Pou Sheng stated that the sales decline led to operating deleverage, while markdowns also negatively impacted profitability.
The company said, “During the period, the Group faced a highly dynamic consumption landscape characterized by weak foot traffic and aggressive promotional activities, attributable to subdued consumer confidence and elevated inventory level in the mainland China market. Amid the headwinds, its retail network experienced a further slowdown in sales momentum, which had led to a mid-teen’s percentage decline in same-store sales. Lower-tier cities also experienced sluggish foot traffic, thereby significantly tempering the performance of the Group’s sub-distributor channels. The decline in sales scale has resulted in operational deleverage, although continued stringent expense controls were put in place. This, coupled with increased markdowns in the promotional environment, has thus impacted the Group’s profitability.”
Pou Sheng added, “The Group continued to enhance its omni-channel capabilities amid the sector’s highly competitive e-commerce landscape, while maintaining a high degree of agility and flexibility in its decision-making. Despite the uncertain economic backdrop, the Group maintained a solid financial position supported by a strong net cash position.”
Pou Sheng’s first-half results will be reported on August 11.
Image courtesy Pou Sheng/Yue Yuen Industrial Holding
