Chinese fresh produce retail chain says weak domestic consumption and store closures affected last year’s performance
Shenzhen Pagoda Industrial Group (Pagoda) has detailed a difficult 2024 in an update to shareholders that forecasts losses and a decrease in revenue for the financial year.
The Hong Kong Stock Exchange-listed Chinese fresh produce retail chain released a profit warning on 3 February providing an updated financial forecast based on a preliminary review of the company’s account for the for the year ending 31 December 2024.
“It is expected that the group (Pagoda) will record loss attributable to owners of the company between Rmb350mn (US$47.91mn) to Rmb400mn (US$54.76mn) for the financial year of 2024, as compared to the profit attributable to owners of the company of approximately Rmb361.7mn (US$49.51mn) for the year ended December 31, 2023,” the update said.
“In addition, the group’s revenue for the financial year of 2024 is expected to decrease by not more than 15.0 per cent as compared to the group’s revenue of approximately Rmb11,390.6mn (US$1.559bn) for the financial year of 2023.”
Pagoda attributed the results to three main factors, the first being weak domestic consumption which forced the company to optimise its product line-up with lower gross profit margin products in the second half of the year to meet demand for high quality products at lower prices.
A second key factor was “(Pagoda) encouraging franchisees to relocate stores from those of high rent-to-revenue ratio to those of low rent-to-revenue ratio, meanwhile, franchisees focusing on advantageous stores with more sustainable rent-to-revenue ratio”. This saw store numbers drop from 6,081 to 5,116 across 2024.
Thirdly, Pagoda increased expenses as it implemented a new strategy to enhance brand recognition called ‘Expert and Leader in High-Quality Fruit Industry’. This included activities such as store refurbishment, marketing campaigns and engagement of good life ambassadors.
Pagoda outlined a number of measures it has or will adopt to improve its operating performance including optimise operational efficiency to meet the consumer demand for products with high cost-performance ratio. It plans to expand its fruit gift product line and develop limited edition festive gifts and small gift packages. The company also said it would “further lower the franchising cost threshold, stimulating and incentivising franchisees to continue to expand their franchised stores”.
