OldTown Coffee suffers as Malaysians spend less
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Malaysian cafe chain OldTown Coffee has reported falling sales and profits as Malaysians continue to get used to life after the imposition of GST on April 1.
The company, which operates 210 discount coffee shops and sells packaged coffee through FMCG channels, posted a profit of RM9.49 million ($US2.2 million) in its first quarter, to June 30, 6.8 per cent less quarter on quarter and an unhealthy 18.9 per cent less year on year. Topline sales slumped 10.5 per cent quarter on quarter and 3.9 per cent year on year to RM94.06 million (US$22.3 million).
OldTown concentrates on the local Malaysian market serving milky coffees and light snacks – it does not make espresso-style coffee drinks like Starbucks.
The company says its declining fortunes were driven by a downturn in cafe sales, rather than packaged goods: Same store coffee shop profit fell 46.4 per cent year on year.
The company plans to open 10 new outlets before the end of the current financial year, next March, representing an expansion of about five per cent.
Sales of packaged foods – mainly instant coffee and coffee mixes – rose 29 per cent.
Questions & Answers
Q.What is the primary reason OldTown Coffee's sales and profits are falling?
What is the primary reason OldTown Coffee's sales and profits are falling?
The company attributes its declining performance to Malaysians spending less, particularly after the Goods and Services Tax (GST) was introduced on April 1. Cafe sales saw a significant downturn.
Q.Which part of OldTown Coffee's business is performing better, cafes or packaged goods?
Which part of OldTown Coffee's business is performing better, cafes or packaged goods?
Packaged goods, such as instant coffee and coffee mixes, saw sales increase by 29 per cent. In contrast, same-store coffee shop profit fell significantly, by 46.4 per cent year on year.
Q.What is OldTown Coffee's current plan for expansion despite the falling profits?
What is OldTown Coffee's current plan for expansion despite the falling profits?
The company plans to open 10 new outlets by the end of the current financial year, which is next March. This represents an expansion of about five per cent of its current store count.
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