THE extension of the movement control order (MCO) has put convenience store operators in a spot. Many are looking at ways to cut costs to stay afloat and remain sustainable amid the Coronavirus (Covid-19) pandemic. The country’s largest homegrown convenience store operator Mynews Holdings Bhd is no exception.
To date, the company has temporarily closed about 100 outlets nationwide in a bid to reduce costs. In total, it has 550 stores including the joint-venture outlets WHSmith, which are managed by Mynews.
Group CEO Dang Tai Luk tells StarBizWeek that the company started by temporarily closing 10% of its outlets at the beginning of the MCO.
“This number has since increased to 30% as of today. Such temporary closure is necessary and unavoidable. It gives us room to correct and restructure.
“Increasing revenue is not easy under this pandemic situation but we are trying our best to regain our lost revenue gradually. However, our business is stable and sustainable despite the closure of more than 100 outlets during this MCO period.”
He says what is important now is to cut cost as much as possible to bring it in line with the drop in revenue so as to make the business sustainable.
The company, he adds, is putting in every effort to reduce costs to face the MCO extension and beyond.
“We will wait for the situation to normalise and remain positive to regain our performance soonest possible. For now, we are grateful to be in the best of the worst situation with a business that is still able to operate and efficiently run to serve the community in this critical time.
“Mynews is fortunate to have launched its online delivery last year and it is serving customers well in addition to bringing in a new stream of the much needed revenue.”
Dang says the company will continue to put in efforts to raise its revenue from this segment.
“We are the first convenience store to go online. After the launch of myNEWS DASH, we went on to partner with GRAB and now myNEWS virtual store is on GRABmart and GRABfood.
“This segment is doing well and growing fast. We now have 30 distribution points in the country, from Maru Bakes and ready-to-eat (RTE) food to daily essential items which we deliver to customers’ doorsteps, ” he says.
High standard: Mynews adopts stringent measures to ensure top hygiene standard at its food processing plant.
High standard: Mynews adopts stringent measures to ensure top hygiene standard at its food processing plant.
However, he adds that online sales will not be able to exceed the total sales of the 550 physical stores but will instead complement its.
Dang says to further drive up revenue, the company encourages cashless payments that are contactless.
It has also temporarily stopped selling exposed food items such as ice-cream, oden and baked snacks but instead put priority on RTE food that are hygienically packed and free from contamination during handling.
“All these measures are important to gain customer trust and confidence in the hygiene of our premises, people and products. They are important as they bring in revenue during these trying times, ” he notes.
On the outlook of the retail convenience business, Dang says: “I do not expect the business to normalise this year in view of the ongoing pandemic that is not expected to be over soon.
“Even after the MCO, it will take some time for foot traffic to increase and I am not sure if it will ever return to the same busy streets and malls of pre-Covid-19 days. As seen in China, most of the places that were busy before the MCO are still quiet.
“Consumer behaviour has shifted. People will restrict their movement. More people will work from home. Consumers will be more careful with hygiene. However, there is always a sustainable level of business for convenience stores.
“We deal with the business of providing your day-to-day essential goods and services and everyone needs them. Also, myNEWS brand’s strength in dry merchandise has long been established and this category will continue to be our forte in time like this, ” Dang says.
For the first quarter ended Jan 31,2020, Mynews posted a lower net profit of RM4.4mil on the back of a higher revenue of RM140.6mil compared with a net profit of RM8.2mil and a revenue of RM123.5mil a year ago.
On its expansion, Dang says it will depend on the MCO period and the overall impact of the pandemic.
“We are the largest homegrown brand and No. 2 overall. Our plan this year is to grow 100 new outlets. Since no construction work can be carried out during the MCO, we will not be completing any new outlets during this period, ” he adds.
The total investment budgeted for the new outlets is about RM50mil.
Meanwhile, Maybank IB Research in a note last month said it was maintaining its “buy” call on the stock with an unchanged target price of 70 sen.
It added that, among others, Mynews has preempted its suppliers and would utilise its excess food processing centre (FPC) capacity to produce more food and beverage goods to ensure that no supply disruption occured at their stores.
“Sales from its online and delivery platform ‘Dash’ has also increased by 35%, ” the research house said.
CGS-CIMB, which is maintaining its “add” call on the counter, said that amid the MCO, on a positive note, the company’s other stores are posting stronger sales, especially its RTE and bakery products, which should help to cushion the revenue loss from the stores that are closed.
“Despite Mynews’ weak near-term earnings outlook from the FPC losses and weak consumer sentiment, we are positive on its long-term potential in Malaysia’s convenience store space on new store openings and the setting up of its own FPC, ” the research house said.
Source : https://www.thestar.com.my/business/business-news/2020/04/18/mynews-aims-for-business-sustainability-amid-mco