Tomei to close ‘My Diamond’ brand

TheEdge Mon, May 13, 2019 09:01am - 4 years View Original


KUALA LUMPUR: After a year where its earnings slumped 70% on a lower sales volume and profit margin, Tomei Consolidated Bhd is now looking to focus on its core brands — its namesake “Tomei” and its niche product brand “Goldheart” — amid the “tough” market it finds itself in.

In line with that, it has decided to do away with its “My Diamond” brand by the third quarter of this year, which will result in the closure of the remaining four stores under the brand, after having trimmed the number from the six that were listed in the group’s 2018 annual report.

Although geared towards the urban and younger market, Tomei’s managing director Datuk Ng Yih Pyng — son of the group’s founder and executive chairman Tan Sri Dr Ng Teck Fong — said My Diamond’s offerings have been overlapping those offered under Tomei and Goldheart.

“It’s also because we have too many brands to juggle with,” said Yih Pyng, adding that the brand’s contribution to the group’s revenue is “minimal”.

Together with the four remaining My Diamond stores, Tomei has 58 retail stores; 48 are under the Tomei brand, four under Goldheart, one under Le Lumiere, and one under De Beers.

At its peak in 2016, Tomei had about 70 stores in Malaysia before it started trimming the number as it realigned its business strategy and focused on improving its manufacturing capacity, product development and store efficiencies.

“We will continue to do what we have been doing. Given the tough market condition now, we have to be really focused on improving for the longer term. It is an ongoing process,” Yih Pyng told The Edge Financial Daily recently.

To keep the group’s eye on what it does best, Yih Pyng said Tomei is neither looking at expanding aggressively nor closing “a lot more” of its stores. Other than the closure of those under the My Diamond brand, Tomei intends to keep its portfolio around its current level.

“We will continue to relocate any least-efficient stores and explore other opportunities elsewhere. We are very cautious in terms of expanding new stores because they would mean higher capital expenditure for us,” said Yih Pyng.

Still, its existing stores will need to be refurbished and the group has allocated some RM3 million this year from internal funds for that.

“Tomei will refit some of our outlets, which are tired and old. In the retail business, having a fresh look and feel is very important,” said Yih Pyng.

There are no plans to launch new products now as the focus is on improving the sales of existing products by concentrating on the Malaysian market amid an influx of competition from overseas, said Yih Pyng.

“A lot of competition is coming into this market. If we don’t focus on our resources here [in Malaysia], we will lose out. We now want to strengthen our position in the local market,” said Yih Pyng, who noted that Tomei has exited all its retail business overseas.

Only a manufacturing plant remains in Vietnam. “We are not looking at retail at this juncture as we want to strengthen our manufacturing capacity there,” said Yih Pyng.

For the financial year ended Dec 31, 2018 (FY18), Tomei’s net profit fell 70% to RM4.75 million from RM16.05 million a year ago, while revenue retreated near 9% to RM564.02 million from RM617.02 million.

The weaker results were due to a lower sales volume and poorer gross profit margin, though the effects of these were partly mitigated by the gain on disposal of its skincare and cosmetic product distribution business last November.

The lower gold prices seen last year also did not help.

“From the beginning of last year, the gold price was on a downward trend until the end of the year, which impacted our margin,” Yih Pyng said, adding that it fell on anticipation of an increase in US interest rates.

“We are not in a high-margin business, hence the impact [of the price movement] was quite significant. I believe that the gold price has been faring more stably this year, as far as the ringgit is concerned,” he added.

Hence, Tomei is hoping to achieve a better top line and bottom line in FY19, on the back of better sales and more stable margins. The price of gold stood at US$1,288.15 (RM5,358.70) per ounce at the end of last week, compared with a low of US$1,174.16 recorded in 2017.

“But again, whether we can achieve that better performance will still depend on the consumer sentiment for the rest of the year,” said Yih Pyng.

Nevertheless, he said, Tomei’s performance in the first four months of the year was more encouraging compared with last year. Tomei is set to release its first-quarter results before May ends.

In line with its less-than-encouraging FY18 earnings, Tomei’s share price fell from its all-time high of 94.5 sen in September 2017 to close at 47.5 sen last Friday. This brings it a market capitalisation of RM65.84 million.

The last time Tomei’s share price hovered below the 50-sen level was over two years ago in April 2017.

Other headwinds Tomei is facing are escalating costs as the minimum wage climbs, and increasing rental cost. Finance cost, meanwhile, is the group’s third largest expenses, which is why it is working on trimming its gearing, said Yih Pyng.

“Our gearing has been on the downward trend over the last few years. This is something that we want to continue working on to strengthen our balance sheet,” said Yih Pyng.

Tomei’s net gearing stood at 0.76 times as at end-2018, versus 0.83 times a year ago.

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