There has been much discussion in recent years about slowing growth of cosmetics retail chains amid a moderate increase in domestic consumption, while retailers manage to upgrade their services as they seek to increase customer traffic and single-store sales, but Poya International Co Ltd (寶雅國際) said it would seek sustained growth via new store openings and tapping the hardware merchandise business.
Poya, which operates 208 outlets selling cosmetics, lingerie and stationery, plans to open 20 to 30 new stores each year and increase its number of stores to 302 by 2022 and 400 by 2026. The company aims to maintain steady single-store sales growth through store improvements and a better product mix, according to a presentation document on the company’s Web site following an investors’ conference on June 26 in Taipei.
The company is ready to launch its first hardware store, Poya Home (寶家), in the third quarter and establish three such outlets nationwide by the end of this year. At the conference, Poya said it plans to add 10 Poya Home outlets next year and up to 30 stores in 2021 to increase the economy of scale.
“Although Poya Home will target a different clientele compared with Poya’s cosmetics stores, management is confident that it can leverage its brand equity and experience running a large store network to build a network of profitable Poya Home stores. We estimate the new business will contribute sales of NT$20 million to NT$30 million [US$642,900 to NT$964,400] in 2019, and NT$400 million in 2020 in tandem with store additions,” SinoPac Securities Investment Service Corp (永豐投顧) analyst Fion Chen (陳奕均) said in a research note on Tuesday last week.
Chen said the nation’s hardware merchandise business generates sales of NT$60 billion a year, but the market is highly fragmented, as independent stores comprise more than 80 percent of total stores.
“Poya has ample resources and economies of scale to snatch a share of the market,” Chen said.
In Taiwan, retail sales of general merchandise — including at department stores, supermarkets, hypermarkets, convenience stores and cosmetics stores — are a closely watched gauge of household consumer confidence and the Ministry of Economic Affairs’ tallies released last month showed that sales increased 3.6 percent to NT$514.3 billion in the first five months, which remain resilient despite slowing economic growth.
SinoPac said it is positive about Poya’s new hardware merchandise business and believes there is ample room for the company’s further store expansion given an estimated domestic market size of 400 cosmetics stores in Taiwan.
“We project more than 10 percent year-on-year sales growth for Poya in 2019 and 2020,” Chen said.
Poya reported consolidated sales grew 10.31 percent annually to NT$6.29 billion in the first five months of the year. In the first quarter, the company’s net profit grew 2.5 percent year-on-year to NT$454.3 million, with earnings per share of NT$4.65.
Poya shares were up 2.38 percent last week and closed at NT$430 on Friday. SinoPac has a 12-month target price of NT$490 on Poya, valuing the stock at 22 times its estimated earnings per share of NT$22.27 next year.
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