Courts Asia expansion drives huge profit rise
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Courts Asia’s strategy of spreading its interests into neighbouring countries is paying off already.
The company has today announced a 253 per cent quarterly increase in profit to S$6 million and a 77.8 per cent rise to S$12.1 million for the first half year. Gross profit for the second quarter rose 12.4 per cent thanks to a focus on higher gross profit margin and higher sales.
While Courts Asia’s second quarter last year was exceptionally challenging, the high growth from a low base should not cast a shadow over an exceptional retail strategy, especially given the almost stagnant nature of the Singapore retail market this year, Courts Asia’s main market, where sales actually slipped 2.6 per cent.
Revenue in neighbouring Malaysia, its second biggest market accounting for 35 per cent of total sales, rose 13 per cent in Singaporean currency and 27 per cent in Malaysian Ringgit, mainly due to bulk sales for digital products. That in itself is an achievement as consumer spending in Malaysia tanked after the introduction of GST on April 1.
“Malaysia has continued to post a good showing with active marketing of our refreshed Courts branding and credit campaign nationwide,” said group CEO Dr Terry O’Connor. “Likewise, we will focus on improving store productivity and cost-saving initiatives as we move forward.”
In Indonesia, where the company is just getting started, sales rose 5.8 per cent with two new stores opening. A fourth new store is due to be trading by Christmas.
“In Indonesia, we are progressing well and sales from our three stores, namely the Megastore in Bekasi and two smaller stores in Mega Bekasi Hypermall and Bogor, have kicked-in. Our second Megastore, located in BSD City, Southwest of Jakarta, begins operations by December this year. This new store also represents our fourth store in the country, and we expect economies of scale and operational efficiency coming into the next financial year,” said O’Connor.
“Malaysia has continued to post a good showing with active marketing of our refreshed Courts branding and credit campaign nationwide,”
In Singapore, Courts is pinning its growth strategy on introducing new retail formats. The first JYSK Danish lifestyle store opened in Bukit Timah in September and US hardware brand ACE Hardware will follow by year’s end. O’Connor says exclusive partnerships with the two brands align with the company’s strategy of offering a comprehensive suite of solutions for the home.
“We will be expanding both JYSK and Ace Hardware stores islandwide within the next five years.
“Beyond cost-saving initiatives, we are focused on optimising the productivity and yield of each of our stores. In Singapore, we continue to rejuvenate our retail concepts to meet changing consumer trends and drive healthier margins.
“Singapore’s retail environment remains subdued, but we expect a continued stream of demand for household appliances and furniture given the expected increase in supply of HDB flats in 2016. This is in line with recent policy changes such as the higher income ceiling and more Central Provident Fund (CPF) grants that have widened the pool of eligible buyers.”
In both Malaysia and Indonesia, Courts Asia is targeting the burgeoning middle classes.
“The recently announced Budget 2016 in Malaysia is slated to boost growth and home ownership with the planned construction of 351,000 housing units. We anticipate that this will drive further demand for affordable furniture and household appliances over the medium term.
“In Indonesia, we plan to leverage on the country’s growing middle class and its strong standing as one of the region’s fastest growing nations by opening a total of six new stores in Indonesia over the next 12 months,” he concluded.
Questions & Answers
Q.What specifically contributed to the rise in gross profit for Courts Asia in the second quarter?
What specifically contributed to the rise in gross profit for Courts Asia in the second quarter?
The company's gross profit rose due to a combined focus on achieving a higher gross profit margin and an increase in overall sales. This strategy helped improve profitability despite challenging market conditions.
Q.How did Courts Asia manage to increase sales in Malaysia despite the introduction of GST?
How did Courts Asia manage to increase sales in Malaysia despite the introduction of GST?
Sales in Malaysia rose primarily due to bulk sales of digital products. Active marketing of the refreshed Courts branding and a credit campaign nationwide also contributed to this performance.
Q.What is Courts Asia's strategy for growth in Singapore, given the subdued retail environment?
What is Courts Asia's strategy for growth in Singapore, given the subdued retail environment?
In Singapore, Courts is introducing new retail formats through exclusive partnerships, such as the JYSK Danish lifestyle store and ACE Hardware. They also expect demand for household goods due to an increase in HDB flats.
Q.What are Courts Asia's future expansion plans for new stores in Indonesia?
What are Courts Asia's future expansion plans for new stores in Indonesia?
Courts Asia plans to open a total of six new stores in Indonesia over the next 12 months. This is part of a strategy to use the country's growing middle class.