Mon, Aug 27, 2018 - Page 15 News List

Gourmet Master rebounds after Tsai visit

By Chen Cheng-hui  /  Staff reporter

Shares of Gourmet Master Co (美食達人) last week recovered from the previous week, when the operator of cafe and bakery chain 85°C (85度C) was embroiled in a row over President Tsai Ing-wen’s (蔡英文) visit to one of its US outlets on Aug. 12.

The company’s shares closed at NT$245 in Taipei trading on Friday, up 7.46 percent for the whole of last week, rebounding from a 16.64 percent plunge a week earlier.

Still, the stock has declined 43.68 percent so far this year on the Taiwan Stock Exchange as investors have expressed concern over the firm’s profitability outlook.

Moreover, the company’s near-term outlook could be clouded by “non-economic factors,” Capital Investment Management Corp (群益投顧) said in an investment report on Wednesday last week.

“Due to the unexpected non-economic factors, the company’s operations in China are likely to be undermined, including lower sales generated by its stores and a slower pace of store expansion,” Capital Investment Management Corp (群益投顧) analyst Ivy Liu (劉炘) said in the report.

“On the other hand, Taiwan and US operations might maintain steady progress,” Liu said.

Without offering an explanation, Gourmet Master on Tuesday last week canceled a scheduled business presentation at the Taipei Exchange, although many had speculated the company wanted to avoid the embarrassment of answering questions regarding an Aug. 15 statement on its Chinese Web site supporting the so-called “1992 consensus.”

The “1992 consensus,” a term former Mainland Affairs Council chairman Su Chi (蘇起) in 2006 admitted making up in 2000, refers to a tacit understanding between the Chinese Nationalist Party (KMT) and the Chinese government that both sides of the Strait acknowledge there is “one China,” with each side having its own interpretation of what “China” means.

However, 85°C chairman Wu Cheng-hsueh (吳政學) confirmed at a media gathering a day earlier that the company’s operations in China faced pressure, saying that sales in China had already been negatively affected by about 10 percent after its listings were removed from some Chinese food delivery platforms, local media reported.

Gourmet Master counts China as its biggest market, where it operated 600 stores as of June 30, compared with 430 stores in Taiwan, 46 in the US, as well as a few in Hong Kong and Australia.

In the first half of this year, net profit increased 6.71 percent to NT$1.02 billion (US$33.1 million) from a year earlier, with earnings per share (EPS) of NT$5.66, while first-half revenue rose 14.86 percent to NT$12.28 billion.

Gross margin in the first half was 59.08 percent, down from 59.52 percent a year earlier, while operating margin reached 11.45 percent, compared with 11.97 percent the previous year, company data showed.

Gourmet Master’s earnings in the first half grew at a slower pace than that of its revenue growth, which Liu said was due to higher expenses in improving the operational efficiency of its central kitchen in southern California to cope with its growing number of US outlets.

A new central kitchen in northern California is expected to start operations in the fourth quarter to support its US expansion, Liu said.

“By then, the stores in northern California and Washington [State] are expected to be supplied by the new central kitchen, greatly reducing logistics expenses,” Liu said. “Nevertheless, the company’s central kitchens might be subject to lower capacity utilization rates ... weighing on its operating margin starting from the fourth quarter.”

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