Gourmet Master Co (美食達人) reported that third-quarter profit declined from a year earlier due to weakening sales in China, but that business remains resilient as last month’s decline appeared to bottom out and sales improved from September.
The operator of cafe and bakery chain 85°C (85度C) on Thursday last week reported that net profit last quarter decreased 40.92 percent to NT$358 million (US$11.62 million) from a year earlier, with earnings per share (EPS) of NT$1.99, while operating profit dropped 46.4 percent to NT$422 million.
The decline last quarter ended 15 straight quarters of profit increases at Gourmet Master and marked the lowest results in three years, company data showed.
Gross margin in the third quarter was 58.2 percent, down 1.23 percentage points from a year earlier, while operating margin reached 7.1 percent, compared with 51.6 percent the previous year, the data showed.
“The third-quarter operating margin of 7.1 percent was better than feared and we expect the company’s quarterly margin to recover in the fourth quarter thanks to a slowing sales decline in China,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Juliette Liu (劉珮昀) said on Friday.
“We expect the company’s operating margin to benefit entering the fourth quarter from cost-saving efforts, such as the adjustment of staff requirements to match current operations,” Liu said.
There are signs of recovery after the company reported that consolidated sales for last month increased 0.95 percent month-on-month and decreased by a less-than-feared 3.04 percent to NT$1.96 billion, while cumulative sales in the first 10 months of the year grew 7 percent annually to NT$2.02 billion, it said.
Gourmet Master counts China as its biggest market, with 600 stores as of June 30, compared with 430 stores in Taiwan and 46 in the US, as well as a few in Hong Kong and Australia.
Unlike its Chinese operations, business in Taiwan and the US was more resilient last quarter, with operating margins of 13.5 percent and 11.5 percent respectively.
In the first three quarters of the year, cumulative net profit was 11.76 percent lower year-on-year at NT$1.38 billion. EPS came in at NT$7.64, compared with NT$8.66 for the same period last year.
Gourmet Master’s shares closed up 0.75 percent at NT$201 in Taipei trading on Friday.
The share price was up 2.03 percent for the whole of last week, but has declined by 53.79 percent so far this year, Taiwan Stock Exchange data showed.
“We expect the share price to find support after signs of sales stabilization in China. The operating margin should recover thanks to expense control in the US, as well as margin improvement backed by greater same-store sales growth and cost savings in China,” Liu said.
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