On the evening of September 13, Parkson issued a very significant announcement of the disposal and intended to sell the entire equity interest of its wholly-owned subsidiary in China, Beijing Huadesheng Property Management Co., Ltd., and related shareholders’ claims. The property operated by the latter is Sun Palace Parkson. The unaudited net book value as of July 31, 2016 was approximately RMB 1.032 billion. Currently, the transaction is waiting for shareholders' approval.
The buyers of this transaction were two companies, namely Shenzhen Qianhai Tuanlan Investment Center and Shanghai Changkun Investment Management Co., Ltd., and the corresponding purchase rights were 99.99999999% and 0.00000001% respectively. They belong to Zhongrong Changhe Capital Investment Management Co., Ltd., which focuses on mergers and acquisitions and investment in high-quality office buildings, commercial retail and residential projects in the core locations of first and second-tier cities in China.
Parkson said in the announcement that after the completion of the sale, the group can no longer invest resources in the loss-making business, so it can use resources to develop other businesses, such as expanding fashion and catering brands.
At the same time, this sale can also create value for the group “at attractive pricesâ€. According to the announcement, the expected maximum proceeds from this sale are approximately RMB 1.9 billion. After deducting other expenses, Parkson will receive approximately RMB 0.9 billion unaudited proceeds.
Founded in 1987, Parkson Group is the largest department store in Malaysia and currently has more than 100 stores in China and Southeast Asia. It entered the Chinese mainland market in 1994, and the Sun Palace Parkson sold this time is located in Chaoyang District, Beijing, including 7 floors above ground and 3 floors underground. Since its opening in December 2010, Parkson has been at a loss.
Sun Parkson's sluggish sales are also a microcosm of the entire Parkson Group's China performance. The financial report shows that from 2013 to 2015, the profit attributable to Parkson Group fell by approximately 58.4%, 33.5% and 179.2%, respectively, and in 2015, the loss was more than 180 million yuan. In the first half of this year, due to the sluggish sales in the Chinese market, revenues continued to decline by 12%.
In this case, stop-loss seems to be the most direct and effective method. In 2012-2015, Parkson closed 10 stores in Shanghai, Guiyang, and Shijiazhuang. After reiterating in the financial report that “will assess the profitability of its stores and may shut down stores in order to improve overall profitability and efficiencyâ€, only in June this year, Parkson has closed Xi’an East Street Store, Chongqing Daping Store and Chongqing Vientiane City Store3 Home stores, of which the first two have been operating for 18 years and 20 years respectively.
However, this does not mean that Parkson has given up its investment in the Chinese market. In fact, it is undergoing a new layout: In January this year, it cooperated with the Korean clothing and clothing group and opened Parkson Youke City Plaza in a prime location in Shanghai's Changning District. The orientation is to provide “Korean-style†brands and services. In June, Parkson Qingdao Golden Lion Plaza opened its doors and positioned itself as “Fine Fashion Department Storeâ€; recently, Parkson’s first boutique supermarket will also be opened in Shanghai.
“China’s retail market is still one of the most promising markets in the world.†Zhong Tingsen, chairman of the Board of Directors of Parkson’s parent company Lion Group, made it clear in the Parkson 2015 financial report that there are currently 300 million middle-class consumers in China. This figure will reach 500 million during the year. "The purchasing power released by China's middle class will promote the future growth of the retail market."
But it was still a bit embarrassing to think that one of the most influential department store brands of the year had declined.
Chart from psfk
Source: Curiosity Daily
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