Tycoon “Superman” Li Ka-Shing’s ParknShop struggles to turn subleasing business profitable
July 30, 2013 Leave a comment
ParknShop struggles to turn subleasing business profitable
Staff Reporter
2013-07-30
Speculation is intensifying over the intention of Hong Kong-based Hutchison Whampoa, one of the largest companies listed on the Hong Kong stock exchange, to sell its supermarket chain Taste International ParknShop. The chain has posted worse-than-expected results in both Hong Kong and mainland China, according to the Chinese-language New Express Daily. Chen Xianming, a senior analyst at Taiping Securities, feels Hutchison Whampoa’s business development has matured, with lower marginal profits. If the company does seek to sell ParknShop, it should be seen as a positive move given the fierce competition the conglomerate faces in mainland China.The daily also visited a few of ParknShop’s locations and found out that much of the space had been left open for subleasing. Many of the stores doing business have made losses. A man surnamed Liu, who was in charge of the lease, pointed out that there were many empty stores looking for a sublease in the buildings.
The owner of a Tupperware store located in one of the ParknShop buildings said the store moved to the location more than six months ago but losses have been so heavy that it plans to move out by next month.
A source close to the industry told the daily that ParknShop is inexperienced in the subleasing business despite its proximity to high-end residential communities, schools and offices.
This year, ParknShop is focused on expanding into mainland China. Lin Huizhen, a senior executive, revealed that the company will gradually reduce the percentage of space open for subleasing and the floor area in new buildings would not exceed 1,000 square meters.
The daily pointed out that some of ParknShop’s commercial centers have also shifted their focus. In March, ParknShop’s flagship store in Guangzhou upgraded to an upscale supermarket called Taste.
Huang Wenjie, an official at the Guangdong Commodity Circulation Chamber of Commerce, said retail expert ParknShop’s abandonment of its sub-leasing venture is a “smart choice” because ParknShop buildings are mostly located in upscale locations, boosting rent.
Huang noted that ParknShop entered the domestic market early, but kept changing its focus, which led to the company’s small market scale and influence. He said it remained to be seen whether the company would be able to successfully grasp future market opportunities after it shifted focus.
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