A.S. Watson: FY19 results: revenue flat

Charles Chan
Senior Retail Analyst
@RetailAnalysis

Date : 19 March 2020

A.S. Watson has posted its annual results for the year ended 31 December 2019. Total retail revenue was up 4% in local currencies, but flat at HKD169.2bn (US$21.8bn) after foreign currency translation impacts.

Results summary – revenue up across all H&B divisions in local currencies 

  • Total retail revenue (H&B segments and Other Retail), EBITDA and EBIT of HKD169.2bn (US$21.8bn), HKD16.9bn (US$2.1bn) and HKD13.6bn (US$1.7bn) increased by 0.1%, 4% and 5% respectively
  • Total revenue for the Health and Beauty segment increased 2% to HKD141.6bn (US$19bn) after currency exchange (up 6% in local currencies), with comparable stores growing 2.4%
  • At the end of 2019, A.S. Watson’s retail division had 15,794 stores across 25 markets, a 5% increase (818 net new stores) compared to prior year
  • At the end of 2019, it had 138m loyalty members worldwide
  • The retailer continues to develop and add to its range of exclusive products – contributing for 35% of total H&B sales in 2019 (2018: 34%)

H&B China: revenue up 3% (up 7% in local currencies)

  • Health and Beauty China trading under the Watsons banner continued to be the leading health and beauty chain in the market, operating in 483 cities
  • In local currency: total revenue increased by 7%, EBITDA and EBIT increased by 3% and 1% respectively
  • EBITDA margin healthy at 18%
  • Store network grew 9% to 3,947, up 339 from prior year
  • Comparable stores sales stores grew 2% (-1.6% in 2018)

H&B Asia: revenue up 8% (up 9% in local currencies)

  • Health and Beauty Asia reported strong performances in many of the ten markets it operated in 2019
  • In local currency: total revenue increased by 9%, EBITDA and EBIT increased by 7% and 6% respectively
  • EBITDA margin remained at 10%
  • Excluding the adverse YOY performance of Watsons Hong Kong, H&B Asia’s EBITDA and EBIT increased by 14% in local currencies
  • H&B Asia’s comparable stores sales grew 4%, strong in Malaysia, Philippines and Thailand, but offset by weaker performance in Hong Kong
  • Store network of the segment grew 8% to 3,367, up 244 from prior year

H&B Western Europe: revenue down 1% (up 4% in local currencies)

  • H&B Western Europe is ASW’s largest subdivision in retail, accounting for 35% of total EBITDA in 2019
  • In local currency: total revenue increased by 4%, EBITDA and EBIT increased by 6% and 5% respectively
  • Comparable stores sales stores grew 1.9% (1.3% in 2018, mainly due to improved performance in Germany and UK
  • Store network of the segment grew 2% to 5,630, up 116 from prior year
  • Click here to see Rossmann’s FY19 results

H&B Eastern Europe: revenue up 1% (up 7% in local currencies)

  • H&B Eastern Europe is A.S. Watson’s smallest H&B division. However, it continued to report steady growth, with revenue up 7% in local currencies
  • Comparable stores sales stores grew 2.9% (2.9% in 2018)
  • Store network of the segment grew 4% to 2,370, up 87 from prior year, covering seven markets in 2019
  • Click here to see Rossmann’s FY19 results

Other retail: revenue down 8% (down 8% in local currencies)

  • Excluding the one-off gain, of approximately HKD633m (US$81.5m) as a result of forming PARKnSHOP Yonghui (joint venture between ASW, Yonghui and Tencent) in Guangdong. China, Other Retail subdivision reported total revenue, EBITDA and EBIT of -8%, -8% and -15% respectively. This was mainly due to the challenging trading conditions in Hong Kong in the second half of 2019
  • Store network of the segment grew 7% to 480, up 32 from prior year, covering Hong Kong, Macau and mainland China
  • Other Retail includes PARKnSHOP, PARKnSHOP Yonghui, Fortress, Watson’s Wine and manufacturing operations for water and beverage businesses

Scale of the business: many local and global challenges

A.S. Watson has cited several uncertainties, including Coronavirus (COVID-19), trade disputes, Brexit uncertainties, social unrest in different markets and fluctuations in commodity prices: all of which could significantly impact the business. In a statement, the retailer, added, “Geographical diversity, strong partner relationships and a loyal member base are the key strengths in maintaining sustainable profitability.

Change of independent non-executive director and board committees membership

From 14 May 2020, there will the following board changes:

  • Mr Wong Chung Hin will retire from his position as Independent Non-executive Director, Chairman and member of the Audit Committee, member of the Nomination Committee and the Remuneration Committee of the Company
  • Mr Wong Kwai Lam will be appointed as Independent Non-executive Director and member of the Audit Committee, the Nomination Committee and the Remuneration Committee of the Company
  • Mr Cheng Hoi Chuen, Vincent will be appointed as Chairman of the Audit Committee of the Company

Want to know more?

Subscribers can read more on A.S. Watson's Strategic Outlook here.