Pharmacy operators buck retail trend
Shalini Kumar 
The pharmacy and personal care sub-sector is the bright spot of the retail sector

THE pharmacy and personal care sub-sector appears to be the bright spot of the retail sector, considering its dampened sentiments.

It improved with a growth of 7.9% year-on-year in Q2 ended June.

A retail pharmacy operator riding on this trend is Caring Pharmacy Group Bhd, whose better performance did not go unnoticed by investors. The counter rose 25% in the Q2 just ended.

It also reached a 52-week high of RM 1.99 on May 3, following the April 28 release of its Q3 results ended Feb 28.

Retail Group Malaysia says that retailers in the pharmacy and personal care sub-sector are expecting to maintain growth at 7.2% for Q3. This reassures investors of better days for Caring.

The pharmacy group had previously been posting a steady decrease in earnings since FY14, despite showing revenue growth.

Its net profit margin has also been declining since FY14, from 4.81% to 2.12% at the end of FY16.

However, there is some improvement in its profit margin for FY17, coming in at 3.65%

In Q3FY17, Caring posted a jump in net profits to RM5.28 mil from RM1.62 mil a year ago, while revenue was higher at RM115.66 mil versus RM103.4 mil.

In Q3FY17, Caring posted a jump in net profits to RM5.28 mil from RM1.62 mil a year ago, while revenue was higher at RM115.66 mil versus RM103.4 mil

The company continued its good run in the subsequent quarter.

For Q4 ended May 31, Caring’s net profit increased 59.2% to RM4.4 mil from RM2.7 mil a year ago. Revenue was higher at RM119.5 mil from RM108.3 mil.

On a 12-month basis, the company chalked up an 80.1% rise in net profit to RM13.1 mil from RM7.3 mil a year ago. This was on the back of a 14.3% increase in revenue to RM459.96 mil from RM402.6 mil.

Caring attributes its higher revenue and earnings to higher sales from aggressive promotional campaigns launched during the financial year.

It opened four new complex outlets, closed one in a main street and one speciality retail outlet. As of May 31, Caring has 107 community pharmacies.

However, despite the mild recovery of the ringgit against the dollar, the company expects its operating environment to remain challenging. This is in view of weak consumer purchasing power and the escalating cost of living.

Nevertheless, by focusing on products and service quality, the group believes it will continue to be profitable in the next financial year, Caring says.

It says the group will continue to adopt a “modest yet pragmatic” plan to open 10-12 new outlets a year with a renewed focus on peripheral towns outside the Klang Valley and other major cities in the country.

The company is reportedly planning to expand to the east coast, Sarawak, and Sabah where it aims to open its first branch this year.

Meanwhile, Bioalpha Holdings Bhd, which owns the Constant pharmacy chain, also sees growth in its retail pharmacy operations.

For Q2 ended June 30, Bioalpha’s net profit rose 76% to RM2.5 mil from RM1.4 mil a year ago. Its revenue was up RM13.2 mil from RM11.97 mil.

However, Bioalpha suffered a slight decline in its retail pharmacy segment revenue in Q2 FY17.

It managed to franchise its outlet, which explains the revenue decrease to RM3.75 mil in Q2 FY17 from RM4.5 mil a year ago.

The company wants to grow the pharmacy business via franchising and has identified Kelantan, Johor and Kedah as new target markets.

“Having focused a big part of last year to rebranding, refurbishing and market positioning activities, the group will channel efforts on expansion and branding activities this year to reap greater benefits in the future,” it says.

To date, the group has a franchise each in Bangi, Selangor, Kota Bahru, Kelantan, and Jerteh, Terengganu.

Bioalpha acquired the Constant pharmacy chain owned by Mediconstant Holdings Sdn Bhd from Ng See Hein and Loh Peng Yeow for RM5 mil, earlier last year.

Since then, it invested in efforts to rebrand and refurbish the stores to provide a fresh look.

“We also streamlined the inventory or stock keeping units to increase our own brand’s offering.

“Additionally, we will continue to leverage on the strategic partnership with Angkatan Koperasi Kebangsaan Malaysia Bhd through our joint venture company MyAngkasa Holdings Sdn Bhd, to offer their members with franchise opportunities.

“We endeavour to double the number of existing Constant outlets by the end of this year, targeting Kelantan, Johor, Kedah, and selected locations around the Klang Valley,” it says in its FY16 annual report.

Moving forward, the company says it will launch the e-Constant online shop with a referral programme, which is an exclusive offering for Angkasa members.

Through the referral programme, their members can earn extra income while Bioalpha benefits from increased sales. This makes for a win-win partnership for both parties.

Also, on Sept 27, it announced that its wholly-owned subsidiary Mediconstant Pharmacy Sdn Bhd had inked a collaboration agreement with Koperasi Polis Diraja Malaysia Bhd (KPD).

The one-year collaboration involves the promotion, sales and marketing of the company’s products through MPSB’s pharmacy outlets and at the premise of Polis Diraja Malaysia.

This article first appeared in Focus Malaysia Issue 254.