Further store closures likely to continue for Bonia

TheEdge Mon, Feb 03, 2020 10:34am - 4 years View Original


Bonia Corp Bhd
(Jan 31, 93 sen)
Downgrade to sell with a lower target price of 84 sen:
Bonia Corp Bhd’s revenue declined for a fourth consecutive year for financial year 2019 (FY19). For the first quarter of FY20, revenue further dipped by 5.1% year-on-year to RM94.1 million attributed to the ongoing process of non-performing store closures on top of weaker retail spending.

Moving forward, we expect the top line to remain under pressure as the sales momentum is likely to be subdued in times of weaker consumer sentiment, exacerbated by the proliferation of online e-commerce portals.

We understand Bonia also faces stiff pricing and market-share pressure from key competitors such as Michael Kors and Coach which run frequent discounts on their merchandise.

As part of the group’s store rationalisation initiative, FY19 saw closures of 60 boutique stores and 249 consignment counters. We gather that further store closures are likely still on the cards for FY20 (particularly for the Sembonia brand), albeit on a smaller scale compared to FY19.

We cut our earnings estimates for FY20 to FY22 by 4%-10%, broadly taking into account: i) weaker consumer spending; ii) proliferation of e-commerce platforms; and iii) slightly higher advertising and promotional (A&P) spending going forward. All in, we are concerned that the ongoing restructuring and A&P measures may be futile in sustaining its brand appeal amid a challenging retail landscape. — Affin Hwang Capital, Jan 31

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