Gourmet Master Co (美食達人), which operates the popular cafe and bakery chain 85°C (85度C), might see a strong recovery in earnings in the July-to-December period after money spent on rennovating its stores in China cut into its profits in the first half.
Slowing growth in sales and a rise in operating expenses in the company’s operations in China translated into a volatility in earnings for the company in the first half.
“As Gourmet Master has already posted most of its planned remodeling expenses for the year in the second quarter, we expect management to predict a strong uptick in earnings for the second half of this year,” Yuanta Securities Co (元大證券) analyst Bonnie Chang (張文慧) said when asked to comment on the company’s conference call scheduled for Tuesday next week.
The company is expected to post lower operating costs in the second half of the year, while seasonal demand should help raise revenue in the period, Chang said in a client note yesterday.
The analyst’s comments came after Gourmet Master yesterday released its financial results for last quarter, which showed the company reported a net income of NT$8.6 million (US$286,000), or earnings per share (EPS) of NT$0.06.
Last quarter’s earnings represented a steep drop of 94 percent from the NT$139.94 million, or NT$0.99 per share, the company booked a year earlier, according to the company’s filing with the Taiwan Stock Exchange.
In the first quarter, Gourmet Master posted a net income of NT$182.83 million, or EPS of NT$1.3.
The NT$4.123 billion of revenue seen in the last quarter represented an increase of 15 percent from the NT$3.59 billion posted in the second quarter of last year, but was a decline of 2.25 percent from the NT$4.22 billion booked in the first quarter, the filing showed.
Chang said the second-quarter EPS of NT$0.06 was significantly below her expectations, attributing the results to a one-off charge for rennovations and a traditionally weak second quarter in China.
This could work to the company’s advantage as it might be able to use the newly renovated stores in China to maximize revenue in the typically strong second half, Chang said.
In June, the company reopened 10 rennovated stores in China, with about 20 remodeled stores in total opened in the past two months there, she said.
Apart from Taiwan and China, the company also operates in Hong Kong, Australia and the US.
In the US market, the company is still seeing a solid expansion, as the latest results showed revenue in the second quarter in the US grew 180 percent year-on-year, contributing about 12 percent of the company’s overall revenue. In contrast, revenue from the US accounted for just 5 percent of total revenue in the second quarter of last year.
Gross margin in the second quarter was 55.57 percent on a consolidated basis, and operating margin was 2.12 percent, compared with 56.4 percent and 6.38 percent respectively seen a year earlier, the company said.
Gourmet Master shares rose 2.76 percent to close at NT$260.5 in Taipei trading yesterday before the company released its earnings results.
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