It has been a tough 18 months for Malaysian convenience chain store operator MyNews Holdings Berhad (KLSE:MYNEWS) (“MyNews”) since the outbreak of Covid-19.
Recently, the group reported that its net loss widened to RM10.32 million in the second quarter ended April 30, 2021 (2QFY21) – the largest quarterly loss since it was listed in 2016, compared with RM8.94 million in the preceding quarter.
Quarterly revenue, however, increased 5.47% to RM103.94 million against RM98.65 million in 1QFY21, but was 15.8% lower compared with RM123.49 million in the previous corresponding quarter of 1QFY21.
In addition to a full quarter of different shapes of movement controls, MyNews said the performance was also adversely affected by uncertainties and random standard operating procedures (SOP) changes to critical business elements such as the permissible business hours.
Drop in business was compounded by increase in price of merchandise that in turn caused the product sales mix to favour the categories of products of lower profit margin such as daily essential items. Hence, gross profit margins contracted to 31.8% in 2QFY21 from 33.3% a year before.
To conserve profitability during these challenging times, MyNews said it has 21 fewer outlets in the current quarter as compared to the preceding year corresponding quarter.
For the cumulative six months ended April 30, 2021 (6MFY21), the group posted a net loss of RM19.26 million from a net profit of RM2.02 million a year ago. Loss per share for the period stood at 2.82 sen, versus earnings per share of 0.3 sen.
Hopeful of positive recovery
However, MyNews is hopeful of a turnaround for positive recovery that will be supported by the ongoing vaccination exercise in the country to reach herd immunity. A gradual relaxation of the movement control restrictions and the country getting out of the stage of emergency soon should lead to a more conducive business environment.
The group has also taken actions to re-aligned and improve efficiency of its business through measures such as cost control in every aspect of the business operations and zero outsource of cost centres including the dry and cold distribution centres and logistics.
Furthermore, MyNews has boldly embarked on 2 new projects for long term growth and faster post-pandemic recover. The new projects are the no. 1 Korean Consumer Value Store (CVS) CU and myNEWS SUPERVALUE chains.
Setting new trend with CU store
Notably, the first Korean CU outlet was successfully opened in Centre Point, Bandar Utama on 1 April 2021, barely five months after the licensing agreement was sealed. Known as South Korea’s number one and largest convenience store, CU by BGF Retail Co Ltd currently has 15,000 stores in Korea and 110 stores in Mongolia.
CU is a CVS destination where Malaysians will get to experience Korean culture (k-culture) through the overall convenient shopping experience. It offers a variety of K-range, from freshly cooked in-store street food to popular beauty products, and sought-after packaged beverages and snacks. Additionally, consumers can look forward to a variety of Korean-inspired ready-to-eat (RTE) food and bakes which are freshly made from MyNews’ halal-certified large-scale food processing centre.
MyNews expects a breakeven profit margin per store basis for CU within 2 years, adding that the second to fifth CU stores are currently being developed. Over the longer term, the group aims to open 500 CU stores in Malaysia within the next 5 years.
Betting on mini-mart scene with SUPERVALUE brand
Separately, MyNews has also entered the mini-mart scene with a new brand named SUPERVALUE to offer consumer a hassle-free shopping experience.
SUPERVALUE is available in 7 locations nationwide: Kajang, Kepong, OUG, Alor Setar in Kedah, Malim Jaya in Melaka, Bidor in Perak, and Simpang Ampat in Pulau Pinang. The group plans to aggressively expand the SUPERVALUE brand and have around 20 stores by year end.
The decision to launch SUPERVALUE has been in the works since last year amidst the pandemic. This came about as MyNews sought for ways to offer customer diversified day-to-day basic household need in neighbourhood committees.
The minimart offers a wide variety of value-for-money goods, including fresh produce, frozen food, pet supplies, snacks, drinks and non-food essentials. In addition, each minimart has a Maru Kafe that serves coffee, ready-to-eat meals and baked pastries.
Better days ahead
Moving forward, the performance of the group will continue to be contingent on the pandemic situation and the related movement control orders and SOPs imposed by the government.
Notwithstanding near-term challenges, strong reception for its new South Korean convenience store CU outlets and myNEWS SUPERVALUE stores could drive medium-to-long term growth.
The group should build back better once the country overcomes the Covid-19 pandemic. Being a leader in CVS space, MyNews is well positioned to tap the opportunities and competitively capture its share of the retail convenience market.