Thai ops to push Courts into the red in Q2
I think i just found out why Courts share price fell for these few days.
COURTS Singapore has issued a profit warning saying that it expects to dip into the red for the three months to September, blaming an expected ‘substantial loss’ from its Thailand operations. ‘It is expected the group will suffer a loss in the second quarter as a result of a substantial drop in sales and the increased provision for credit sales debtors in Thailand due to the difficult operating environment there,’ the company said yesterday.In August, Courts reported a 31 per cent fall in net profit to $734,000 for its first quarter ended June 30, although sales grew 12 per cent to $85 million.
At the time, the company said that sales from Thailand fell 18 per cent on a like-for-like basis, after it put in place strict measures to lower credit risk ‘particularly in north-east region, in view of lower customer accounts quality’. Overall, its Thailand sales – which contributed 11 per cent of group turnover – still rose 23 per cent in the first quarter, boosted mainly by three new stores there.
The actual sales for Thailand for the second quarter to Sept 30 are expected to be ‘significantly lower’ when compared to the corresponding period last year, Courts said in yesterday’s statement. ‘This is due mainly to the tightened credit sanctions in Thailand,’ it added.
‘The company deems it appropriate to issue a profit warning. Thailand is expected to reflect a substantial loss which will in turn result in a loss for the group on a consolidated basis,’ it said. The financial results are expected to be published on Nov 8. According to data from Bloomberg, the company has been profitable for the past 11 quarters, except for the three months to March 31 this year.
The furniture and electronics retailer opened its first store in Thailand in 2003, and began an aggressive expansion drive in the country, opening more than half a dozen new stores there since then.
In Singapore, it has 11 stores and is also building its largest store to date – the 115,000 sq ft Courts Megastore in Tampines slated to open at the end of the year.
Credit sales are an important feature of its business. Consumers are attracted by the option of paying for purchases in monthly instalments at fixed interest rates.
Yesterday, managing director Terry O’Connor said: ‘We would like to highlight that the second-quarter results are due to the loss reflected in the Thai business. The Singapore business continues to maintain healthy sales records.’
Courts’ share price, which has risen 13 per cent since the start of the year, closed unchanged at 70 cents yesterday.
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Comments
Hi Steven, i believe they will do their own market research as what they deem needed. No company will go in blindly to an unfamiliar territory without doing due diligence.
Some companies went in with the thought that they can change the way consumers shop or buy products. courts might be thinking about the same thing.
Its nice to hear your views from the ground. I didnt see one courts when i was over there in thailand.
Btw, got a question hope you can provide me with some answers. Over there in Thailand, is BRANDS chicken essence the prevailing choice when it comes to chicken essence?
regards
Hi drizzt
Yes, BRANDS chicken essence is the preferred choice here in Thailand although SCOTTS is putting up a firece fight for market share. Both brands have huge budgets for advertising on TV and sponsorship of game shows (which are incredibly popular here) offering winners good cash prizes. Still I think BRANDS has the upper hand in market share. All the hampers I received for my birthday and new year invariably contain a dozen bottles of BRANDS. My other senior citizen neighbours all told me that their children buy them BRANDS. That’s how I gather that BRANDS must be having the biggest market share of chicken essence over here.
Hope this info helps.
Regards
Hi steven, thanks for the information. Very well appreciated. why is there such a following for chicken essence in Thailand?
It’s only during the last 5 years or so that sales of chicken essence has picked up in Thailand. I guess it has a lot to do with the advertising campaign lauched by the 2 leading companies, namely BRANDS and SCOTTs. Even myself has been quite impressed with the advertisements on TV which I think must have cost the companies quite a lot of money. Also I think the growing middle class here are quite easily convinced, e.g. in one of the TV adverts, the CEO of a large company takes BRANDS essence of chicken daily and as a result he is able to remember the name of each and everyone in his company from the cleaner to his assistant. This kind of advert. I’m quite sure, must have impressed a lot of the Thai middle class.
Hi Steven,
And i thought chicken essence drinking was prevalent before that. Chicken essence is good. I know cause i was a student not too long ago. For working people it replenishes lost energy as well. If not, by 38 you will likely feel damn tired.
Having a good product is not enough. Branding aside, a consumer cannot really tell the difference between different brand of chicken essence. Hopefully Brands will have a way in Thailand as compare to COURTS.
Hi drizzt
My first visit to Thailand was more than 30 years ago and being a coffee addict and heavy smoker, it wasn’t easy for me as I couldn’t get a cup of coffee anywhere outside the hotel (which has to be at least 4-star). Very few people drank coffee then in Thailand. I couldn’t get my brand of cigarettes (Dunhill or any others found in S’pore then), only Thai cigarettes were available. So I used to buy 2 cartons of cigarettes, a jar of Nescafe and a kilogram or 2 of sugar whenever I come to stay for 10 days or more at my inlaws’. There wasn’t any supermarkets, no Nescafe and limited outlets for sugar.
Now Thailand has become one of the largest growers of sugarcane and producers of sugar and also coffee. The Nescafe I buy from the hypermakets here are from coffee beans grown in Thailand. S’pore brand of Super Coffeemix has made its way into the Thai market as well with lots of adertisements daily on the Thai TV. You now can buy most brands of imported cigarettes in Bangkok.
And by the way, chicken essence (BRANDS) is now produced in Thailand, too.
Great changes have taken place since I came to live here 10 years ago.
Hi steven, wow that was long time back. My first trip to thailand was 15 years old. We won a table tennis division tourney so our reward was a trip there. Chang mai was nice then, but I wasnt old enough to appreciate it.
Coffee and smoking makes a bad combination. I used to take alot of coffeemix 3 in 1. that is before my skin got reactive to caffine.
It’s a terrible mistake for Courts to attempt to break into the Thai market. They should have done a thorough research into the furniture, electrical and home appliances business in Thailand before even thinking of setting up here. The competition here for Courts type of business is really fierce and already there are some well established large players here both listed and unlisted on the Thai stock exchange. Then there are hundreds of smaller players and family run companies.
Most of my neighbours (and myself) bought furniture and furnishing materials (e.g. curtains, blinds, etc) from small family run companies that will custom make your orders. Workmanship is usually more than satisfactory. Price wise also, I doubt if Courts could compete with those small family run companies as well as the big players. As for buying on credit, there never has been any problems over here. So I just can’t understand why Courts had decided to set up here. I have yet to step into the Courts store a few kilometres from my place even though I have been driving past it almost everyday for at a year now.