FAST NEWS: Zhou Hei Ya’s profit dips on weak sales

The Latest: Food processor and retailer Zhou Hei Ya International Holdings Co. Ltd. (1458.HK) warned on Wednesday that its revenue dropped 11.3% to 1.25 billion yuan ($175 million) in the first half of the year, while its net profit fell between 65.6% and 70.5% to 30 million yuan to 35 million yuan.

Looking Up: The company has reviewed and adjusted key strategies involving its stores, products and users in response to the current challenging retail environment. It said it will continue to optimize the quality of single-store operations, strengthen store management, enhance its membership and private domain operations, and also strictly control costs.

Take Note: The profit decline mainly owed to weakening same-store sales in the current climate of consumer caution. The company also blamed a year-on-year increase in its self-operated store count, which led to an increase in in fixed expenses such as labor and rent.

Digging Deeper: Established in 2006, Zhou Hei Ya produces and sells cooked and marinated duck-based products and was listed in Hong Kong in November 2016. It has expanded rapidly since its IPO, with 3,816 stores at the end of last year, covering 331 cities throughout China. Its business was severely disrupted during the pandemic, and its revenues continued to remain volatile last year even after China ended its strict Covid restrictions. Its profits were also negatively affected by spending on its ongoing expansion.

Market Reaction: Zhou Hei Ya’s share price fluctuated slightly on Thursday and closed up 0.6% at HK$1.64 by the midday break. The stock now trades at the lower end of its 52-week price range.

Translation by A. Au

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