Tsann Kuen Group (燦坤), the nation's largest home appliance and consumer electronics retailer by sales, decided to sell its money-losing retail business in China to its bigger Chinese rival in the hope of raising the group's profitability and improving its financial books, the company announced yesterday.
"Tsann Kuen's Chinese retail [business] has continued to show losses over the last two years after the retail giant broke into the market in 2003," the company said in an announcement yesterday.
The firm decided to sell the retail unit to its Chinese rival, Yongle (
Tsann Kuen attributed its Chinese retail unit's poor performance to the different business model in China compared to its home market and its late entry into the Chinese market, which made it hard for the company to establish the economic scale necessary to compete with local counterparts, the statement said.
The retail giant will need to bear a loss amounting to 87.6 million yuan (US$10.6 million) after selling the retail unit to Yongle for 143.8 million yuan, the firm said.
Yongle's takeover of Tsann Kuen's retail unit, including its around 35 outlets and inventory worth around 171.3 million yuan, began last Friday and is slated to be completed on Jan. 10.
Yongle, established in Shanghai in 1996, is one of China's top three home appliance retailers with sales exceeding NT$40 billion (US$1.2 billion) last year. The heavyweight player is reportedly planning to double its number of outlets to around 250 across China this year, from some 130 currently.
Tsann Kuen, established in Taiwan in 1978, started out as a small home appliance maker. Its lucrative manufacturing business is expected to deliver 60 million units of home appliances this year, including coffee makers, grills and irons, to almost 90 percent of the world's home appliance brands, including Starbucks, Royal Philips Electronics and General Electric Co.
The company moved into Taiwan's home appliance and electronics retail market in 1991 and has since expanded to become the sector's dominant player, with 167 outlets nationwide.
"We think the company made the right decision ? by getting rid of its ailing retail unit in China," said Chen Yen-liang (
The money from the sale is expected to ease the company's tight cash position from stockpiled inventory in the home market and may ultimately help improve the company's profitability, Chen said.
Tsann Kuen posted NT$11.9 billion in sales in the first five months of this year, down 4.51 percent from last year.
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