Gourmet Master likely to see mild growth this year

By Kevin Chen  /  Staff reporter

Tue, Jan 01, 2013 - Page 13

With slowing growth in China and the uncertain outlook for its new businesses in Taiwan, Gourmet Master Co (美食達人), which owns cafe and bakery chain 85°C (85度C), is likely to see net profit grow by just 2 percent last year from 2011, Fubon Securities Co (富邦證券) said.

While the company, which has one office in Greater Taichung and two in Shanghai, has initiated several new businesses since October, its new ventures will not be large enough to reverse the slowing growth in its Chinese bakery business, the local brokerage said in a report on Thursday.

The company is forecast to report NT$1.16 billion (US$39.8 million) in net profit last year, or earnings per share of NT$8.23, Fubon analyst George Chu (朱家麟) said in the report.

In 2011, Gourmet Master posted net profit of NT$1.14 billion, or NT$8.06 per share.

Revenue might increase 16.98 percent to NT$13.4 billion last year, with operating margin of 10.57 percent, compared with revenue of NT$11.46 billion and operating margin of 12.26 percent in 2011, according to Fubon’s estimates.

For this year, net profit is predicted to reach NT$1.25 billion (NT$8.87 per share), while revenue would increase 8.53 percent to NT$14.54 billion, with an operating margin of 10.44 percent, Chu said in the report.

In addition to the Greater China region, Gourmet Master also operates bakeries and coffee stores in Australia and the US.

Last month, the company opened its third outlet in California as part of its plan to open another 20 stores in the US within five years.

“We believe the expansion of Gourmet Master’s US operations will provide incremental growth to offset slowing growth in China,” Chu said. “With high revenue, the US stores have an operating margin of 20 percent, higher than the blended average of 10 percent.”

With the company’s US operations accounting for just 3 percent to 4 percent of its total sales last year, rising rent and labor in both Taiwan and China, as well as slower-than-expected new store revenue growth in the central and western parts of China, have continued to push up operating costs, keeping margin pressure on the company, Chu said.

On Nov. 30, vice president of investor relations Chris Lee (李翰霖), told an investors’ conference in Taipei that the company might open outlets in China at a slower pace next year, about 50 to 100 new stores in China this year following 110 new outlets last year.

Lee said at the time that the company planned to open more stores in China’s second-tier and third-tier cities in the long term because of bigger consumption potential there.

Meanwhile, in Taiwan, the company late last year launched a high-end bakery chain and a hotpot restaurant franchise to maintain its sales momentum at home market.

The high-end Better Simple (麵包同話) bakery chain — which was launched in October with a high average selling price of NT$50 to NT$100 per item for its European-style soft bread — is similar to other high-end bakeries that became fashionable in Taiwan last year, while the hotpot restaurant chain Top One Pot (這一鍋) — which began business in November with a focus on the mid to high-end segment (NT$600 per person) — is competing with market leaders such as Tripod King (鼎王麻辣鍋).

The two new businesses saw initial strong sales, but Chu said their long-term outlook would be subject to the fast-changing tastes of the Taiwanese.

Moreover, the current poor consumer sentiment may delay any fast expansion for the two new businesses, he added.

Gourmet Master operates 732 shops worldwide, with 347 in Taiwan, 374 in China, five in Australia, three each in Hong Kong and the US.

Shares of the company closed unchanged on NT$190 on Friday, although they ended 6.4 percent lower for the whole of last year, the Taiwan Stock Exchange's data showed.

Additional reporting by Amy Su