A.S. Watson H1: slower growth in health and beauty

Date : 15 August 2016

A.S. Watson has reported a weaker performance with a 2% revenue increase across key markets for its health and beauty retail operations. Currency fluctuations and weak performance in China caused the slowdown.

Growth in Europe held back by adverse exchange rates

Within Western Europe, comparable store sales in health and beauty grew by 3.3%. Given the depreciation of the currency over the period, total revenue only grew by 3%, even though in local currency, the retailer saw a total increase of 5%. The UK was a major growth contributor with the comparable store sales growth of 6.5% for the period.

In Eastern Europe, same store sales in health and beauty increased by 5.2% with revenue soaring by 12% in local currency, which translated to 5% in HK dollars. Out of the 255 new stores opened over the last 12 months, 125 were in Eastern Europe and 130 were in Western Europe.

Like-for-like declined by 8.5% in China health and beauty

Watsons China’s total revenue was flat in local currency year-on-year, despite the 17% increase in stores numbers. Comparable store sales growth was a negative 8.5% due to competition from e-commerce and  weak market sentiment. Watsons China operated a network of 2,622 stores at the end of June. It will continue to open stores in China and expand its e-commerce platform to compete in the fast growing e-commerce world.

Other retail formats declined significantly

The combined revenue from PARKnSHOP, Fortress, Watsons Wine, and manufacturing operations for water and beverage businesses declined by 14% year-on-year, as a result of the severely reduced tourist arrivals and spending in H1.

Store expansion continues with a focus on Asia

 

The retailer plans to open over 800 stores in H2 2016, with 65% under the health and beauty format in China and certain Asian countries.