PETALING JAYA: Aeon Co (M) Bhd is off to a strong start this year, with net profit coming in at RM38.2 million for the first quarter ended March 31, 2023 (Q1 FY2023) and hitting the mark for research houses’ expectations.
Net profit was up 35.9% from RM28.1 million in the same quarter last year, and 53.4% higher than the preceding quarter’s RM24.9 million.
The retail chain operator recorded revenue of RM941.4 million, which is 4.2% higher compared to the preceding quarter of RM903.7 million due to higher festive spending.
Earnings came in at 24% of the consensus forecast for the group’s full year profit.
RHB Investment Bank analyst Soong Wei Siang said that earnings met expectations, with the normalisation in business activities leading to improved performance.
“However, we remain wary of earnings downside risks moving forward stemming from softer consumer spending and potential margin pressure from higher opex (operating expenditure),” he said.
Current elevated inflationary pressure and potential electricity tariff increases in the second half (H2 2023) could exert margin pressure on Aeon.
With that said, the group’s management is looking to enhance its product assortments, fresh food, and private labels to drive stronger sales whilst the increase in tourist arrivals should also help alleviate pressure on margins.
Rejuvenating old malls
Aeon has also allocated RM250 million for capital expenditure this year, focusing on rejuvenating old malls and the installation of solar panels.
Kenanga Investment Bank analyst Tan Jia Hui added that AEON’s customer base was skewed towards the M40 (middle 40% of income) group, whose spending power was less impacted by inflation.
“We believe AEON’s top line will continue to be driven by resilient consumer spending backed by a stable job market, government subsidies and financial assistance to the low-income group,” he said.
Downside risks to the group’s prospects involve competition from existing and new players, sustained high inflation eroding consumer spending power and long-term trends towards online shopping.
Aeon has 28 Aeon Malls, 35 Aeon stores, 8 Aeon MaxValue outlets, 62 Aeon Wellness outlets, 41 Daiso stores and 3 Komai-so stores.
Aeon’s share price was up 4% or 5 sen today to RM1.30, giving it a market capitalisation of RM1.83 billion.