Taiwan FamilyMart Co (全家便利商店) yesterday gave an optimistic business outlook for this year, as the convenience store operator taps into growing demand for logistics services amid continued strength in the e-commerce market.
The nation’s second-biggest convenience store chain, with 3,225 stores nationwide as of the end of June, said it is undeterred by the government’s decision to raise the minimum wage from NT$140 to NT$150 per hour, adding that its effects would be minimal, as 90 percent of its stores are franchises.
The wage hike is expected to add NT$300 million (US$9.76 million) in annual payroll expenses and erode yearly net income by about NT$30 million, FamilyMart chief accounting officer Lee Chien-hsin (李建興) told an investors’ conference yesterday.
Franchisees’ monthly profits could drop between NT$5,000 and NT$8,000, depending on the number of part-time workers employed at each store, Lee said, adding that wage hikes would inevitably affect labor-intensive businesses, such as convenience stores.
In response to rising labor costs, the company has been introducing new systems to improve efficiency, such as tagging products electronically and using radio frequency identification tags for e-commerce packages.
To tap fast-growing income from e-commerce delivery and handling fees, Lee said that a new facility in Kaohsiung that is set to go online in the final quarter of this year would improve the company’s logistics capacity.
Improved logistics would also allow the company to expand its presence in the fresh produce market, Lee said, adding that it is considering providing a last-mile delivery service that would deliver packages from stores to consumers’ homes.
Profitability is also improving in China, where Taiwan FamilyMart operates 2,406 stores via a 18.3 percent-owned holding company, Lee said.
Taiwan FamilyMart and other shareholders plan to add 400 stores in China by the end of this year to achieve the required scale to ensure profitability, Lee said.
The company reported that net income in the first half of this year rose 30.49 percent annually to NT$717 million, while sales rose 10.57 percent year-on-year to NT$34.48 billion. Earnings per share at the end of June were NT$3.21.
Sales growth expanded slightly following the government’s decision to raise taxes on cigarettes by NT$20 per pack, Lee said.
Gross profit during the period rose 10.02 percent annually to NT$12.77 billion, while gross margin fell by 0.19 percentage points to 37.03 percent.
Operating profits rose 34.97 percent annually to NT$761 million, while operating margin rose 0.4 percent from a year ago to 2.21 percent.
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