KUALA LUMPUR: Retail group Aeon Co (M) Bhd is planning to spend about RM500mil on capital expenditure (capex) to refurbish some of its outlets as well as Daiso stores.
Managing director Shinobu Washizawa said the allocation was lower than the group’s capex last year, as it expects a challenging year ahead due to the higher cost of living, cost of doing business and uncertainties from the trade war conflict.
He pointed out that the group would be focusing on its outlets’ operating efficiency and expanding its delica or ready-to-eat Aeon product segment such as the bakery, sushi, cafe, pizza and drinks, which generate higher margins.
“Delica or ready-to-eat products have been doing well and have contributed higher margins to the group. It is the fastest-growing segment for the group and we are allocating more floor space.
“At the moment, the ready-to-eat products contribute half of Aeon supermarket sales compared to 30% last year,” Washizawa told reporters after the group’s AGM yesterday.
He said the capex would be used to renovate Aeon Taman Maluri Mall in Kuala Lumpur, opening its new AEON mall in Nilai, Negri Sembilan, and upgrading some of its Daiso and Wellnesss pharmacy stores.
Notably, Aeon Malaysia manages 28 Aeon malls and 34 Aeon outlets across the country. The company also manages one MaxValu and four MaxValu Prime Supermarkets.
For the financial year ended Dec 31, 2018, Aeon saw a flat net profit growth at RM105.1mil, on the back of a 5.6% year-on-year revenue growth to RM4.35bil driven by new stores, shopping malls and newly renovated stores.
Washizawa expects 2019 to be a challenging year for the group due to the weak market sentiment and consumers being conscious about their spending.
“It would be a challenging year, but we are working on controlling our costs and increasing operational efficiencies,” he said.
He said the government had requested the company to control its product prices from increasing too fast and absorb some of the cost.
“Retailers have been asked to look for ways to control prices, which include absorbing the cost of the sales and service tax and working with our suppliers on the pricing,” Washizawa explained.
To boost sales, he said, Aeon would further expand its online shopping presence and is looking for more partners in this segment.
Last year, Aeon had partnered with online concierge and delivery service Honestbee to tap into the growing demand for home grocery delivery and launch its first Click and Collect service with drive-through lanes at selected Aeon outlets.
“We have seen strong demand in the online segment since we rolled out in 2018. As of now, we have 15 outlets that are participating in the e-commerce segment and we are targeting for more outlets to participate this year,” Washizawa said.
He said Aeon preferred to collaborate with existing e-commerce platform providers instead of setting up its own delivery services and platform.
Shares of Aeon have been on a decline since mid-2018. Yesterday, the stock closed five sen higher at RM1.52.