Dr. Wu Skincare Co Ltd (達爾膚生醫科技) yesterday issued a reserved outlook on earnings growth this year due to challenging macroeconomic conditions.
In light of weak growth in consumer spending, as well as the falling number of Chinese tourists, the company’s retail partners have turned bearish about placing stocking orders, which have dragged on growth momentum, Dr. Wu chairman and chief executive officer Eric Wu (吳奕叡) said at an investors’ conference in Taipei.
Going forward, the company is not expecting growth momentum to decelerate, Wu said, referring to last year’s results when the company posted 33 percent and 36.7 percent annual increases in sales and net income respectively.
Sales last month were also hit as the company swapped out poor-performing retail partners as part of plans to expand its sales channels, Wu said, adding that the situation would pass in the short-term as the new partners grow more familiar with its operations.
“Restocking orders from outgoing partners slowed as their contracts neared expiration,” Wu said, noting that sales last month fell 46.94 percent month-on-month to NT$50.17 million (US$1.67 million).
Similarly, a switch in retail partners also hampered sales growth at the company’s overseas operations in China, Malaysia and Singapore, Wu said.
The company reported that net income rose 1.3 percent year-on-year to NT$67.92 million in the first quarter, with sales gaining 10.2 percent to NT$257.98 million. Earnings per share were NT$1.48.
During the period, the company incurred foreign-exchange losses of NT$11.87 million due to the stronger New Taiwan dollar.
The company is aiming to maintain growth momentum this year by teaming up with leading brick-and-mortar chains in Taiwan and China, Wu said.
In Taiwan, where offline sales represented 60 percent of total sales last year, the firm’s products are to be featured at @cosme stores, a Japanese chain, Wu said.
In China, the company has secured agreements to feature its products at 50 Watson’s stores before the end of the first half of the year and 100 stores before the end of this year, Wu added.
Despite the downturn in sales, Wu said that the company has maintained its profitability while containing costs, with gross margin holding at 68.5 percent last quarter, up from 67.3 percent the previous year.
He said that although margins are lower in China due to higher marketing expenses for brand-building, the firm is expecting continued growth in sales.
Sales contribution has grown from 2 percent in 2014 to about 20 percent at the end of last year, he said.
The company plans to expand its digital marketing and social media promotions to maintain sales momentum in China, where revenue last year registered a 63 percent year-on-year increase to NT$226.43 million, he said.
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