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[FEDS] FEDS earnings soar on higher consumption

Post Date 2018.05.21From:Taipei Times

Far Eastern Department Stores Ltd (FEDS, 遠東百貨) last week said its earnings per share (EPS) rose nearly 65 percent in the first quarter of this year, thanks to the recovery of discretionary consumption in Taiwan and a sharp reduction in non-operating losses following the closure of loss-making stores in China.

With Taiwan’s GDP continuing to expand and consumer sentiment remaining strong, overall consumption should increase steadily to help boost the company’s sales growth this year, Taishin Securities Investment Advisory Co (台新投顧) said in a note on Wednesday last week.

The absence of any negative effects from last year’s store closures in China and better operating leverage in Taiwan should also improve its profitability outlook, it said.

Besides running Far Eastern department stores, the company also operates the Amart Co (愛買量販店) hypermarket chain and is a main investor in Far Eastern Sogo Department Store (遠東Sogo百貨).

During the January-to-March period, the retail and department store arm of Far Eastern Group (遠東集團) saw net profit increase to NT$390.42 million (US$13.05 million), with EPS of NT$0.28. That compares with net profit of NT$241.63 million a year earlier, or NT$0.17 per share, the company’s financial statement showed.

Operating profit grew 50.37 percent year-on-year to NT$1.01 billion in the first quarter, with operating margin increasing by 3.87 percentage points to 10.8 percent.

The company attributed the results to an annual increase of 21.8 percent to NT$1.04 billion in operating profit generated by its Taiwan operations, which offset operating losses of NT$30 million in China operations and the company’s non-operating losses of NT$91 million in the first quarter.

In the first four months this year, total revenue fell 4.01 percent annually to NT$12.49 billion, after the closure of two stores in China last year.

“With the recovery of consumption in Taiwan, sales of Far Eastern Department Store and Sogo Department Store both grew more than 3 percent year-on-year in the first quarter,” Taishin Securities Investment Advisory Co (台新投顧) retail industry researcher Alan Chen (陳炤綸) said. “Coupled with lower expenses of depreciation and amortization for Banchiao Mega City (板橋大遠百) and Taichung Top City (台中大遠百), the company could see positive operating leverage and steady earnings growth in its Taiwan operations this year.”

“Meanwhile, the continued implementation of cost-control measures in the company’s China operations would result in a further decrease in operating losses there,” he added.

Chen said he expects the positive trend to continue, adding that the company should be on track to achieve EPS of NT$1.43 this year, up from NT$1.08 last year.

Far Eastern shares on Friday last week closed at NT$19.3. They have risen 28.67 percent so far this year.