759 Store and Japan Home Centre’s parent companies issues profit warnings as overseas travel demand surges

672
759 Store

11th December 2023 – (Hong Kong) Hong Kong Residents’ Pent-up Demand for Overseas Travel Explodes, 759 Store’s CEC International (00759) and Japan Home Centre’s Parent Company IH Retail (01373) Issue Profit Warnings as Net Profits Plunge in the Past Six Months

In a synchronised move, CEC International (00759), the operator of “759 Store,” and IH Retail (01373), the parent company of Japan Home Centre, have both issued profit warnings, signalling a significant decline in net profits for the six months ending in October. This comes as Hong Kong residents, who have been suppressing their desire for overseas travel for the past three years, are now unleashing their demand at an unprecedented scale.

CEC International estimates that its net profit for the first half of the fiscal year ending in October is only around HK$100,000 to HK$500,000, a staggering year-on-year decline of 98.52% to 99.7%. The company attributes this decline to the absence of government subsidies related to the COVID-19 pandemic and the significant surge in outbound travel as travel restrictions ease globally. As a result, retail sales have significantly decreased.

Even after excluding last year’s subsidies amounting to HK$18.842 million from the company’s performance in the same period, CEC International’s net profit for the first half of the fiscal year still experienced a year-on-year decline of 96.65% to 99.33%.

IH Retail, the parent company of Japan Home Centre, also issued a profit warning, revealing a year-on-year decrease of approximately 32% to 38% in net profit for the six months ending in October. The decline can be attributed to the discontinuation of wage subsidies under the “Employment Support Scheme” and the impact of retaliatory outbound travel from Hong Kong, which has affected customer footfall in retail stores, leading to a slowdown in revenue growth.

The company estimates a 4.7% year-on-year decrease in mid-term revenue. Apart from the surge in outbound travel by Hong Kong residents, other contributing factors include the high base effect from increased demand for anti-pandemic supplies last year and the damage caused to store facilities by typhoons and heavy rainstorms in September and October, which disrupted business operations.

Additional factors affecting the company’s performance include rising expenses for employee welfare and one-time expenditures incurred from warehouse relocation and improvements in Hong Kong to enhance logistics efficiency, thereby increasing operating costs.