Costs eat into Eu Yan Sang profit

Chinese herbal medicine retailer Eu Yan Sang has repoted a 38 per cent drop in profit on stable revenues in the first quarter of its current financial year.

Eu Yan Sang posted a net profit of S$5.45 million on sales of $110 million.

Improved sales in Australia, Singapore and Malaysia during the Chinese New Year, and in Malaysia where shoppers stocked up ahead of the introduction of GST on April 1, balanced a decline in Hong Kong, where the company says sales were soft due to the fall in mainland visitros.

Gross margin for the quarter dipped 2.6 per cent due mainly to the impact of sales mix and longer lead time to Chinese New Year. Correspondingly, the group’s operating profit declined due to lower gross margin contribution and increased operating expenses.

As at 31 March 2015, Eu Yan Sang had 258 company-operated retail outlets and 30 franchises in China, Hong Kong, Macau, Malaysia, Singapore and Australia.

Group CEO Richard Eu said despite the challenging retail environment in Hong Kong and Macau, where retail revenue fell 21 per cent, most of the company’s key markets showed resilience.

“Singapore, Malaysia and Australia markets have reported revenue growth. We see long-term opportunities especially in rising health awareness as consumers are becoming more discerning and better educated about wellness issues and are actively seeking for healthy food and natural health remedies. This is a space where we differentiate ourselves from others, where consumers understand product quality over pricing.

“Rising disposable income in the region also played an important role to our business. In addition, our wellness offerings are easily accessible through ongoing introduction of new, exciting products and the extension of our wholesale channels,” he said.