SKM Striving for New Revenue Records & IPO

Recent discussions on IPO progress and its vice-presidential candidate have been a focus of the board as well as outside parties. During our interview, Director and President Richard Wu of Shin Kong Mitsukoshi share his perspectives with the public for the first time. Wu revealed that the IPO has already been approved by the board, and the company will now be working towards its IPO. Their most important task right now is to lead the team and take charge of operations.

EPS Sustained at NT$1.3 for Two Consecutive Years

Speaking frankly, Richard Wu shared that the two-year pandemic has had some impact on Shin Kong Mitsukoshi’s sales. Last year, the department store welcomed 10% fewer offline customers compared to 2019, but the per-customer transaction has also increased. By expanding revenue sources and limiting budgets, Shin Kong Mitsukoshi has been able to sustain an EPS of NT$1.3 for two consecutive years. When asked about his outlook for 2022, Richard Wu expressed optimism, stating that they are expecting up to NT$83 billion in revenue, which will be a new record high.

The Shin Kong Mitsukoshi board has decided to IPO the company, which currently has a share capital of NT$12.5 billion as well as a consolidated revenue of NT$100 billion from its department stores, investments in shopping centers in Mainland China, movie theaters, Fayaque, and iStore (their Apple store). The company has maintained an EPS of NT$1.3 for two consecutive years now.

Richard Wu admitted that the numbers were “hard-earned.” The company’s business was impacted by the pandemic and, despite their decreasing losses in Mainland China, it still put the company under strain. Multiple confirmed COVID-19 cases at Shin Kong Mitsukoshi locations last year also shut down affected locations by up to 30 days. Given the various challenges, profits, equivalent to that of last year’s, were indeed hard-earned. The board has also recognized the management team’s efforts over the past two years on many occasions.

In the first half of 2022, the company experienced positive growth compared to annual sales from last year despite the second wave of the pandemic but still suffers from lower sales than the same time last year. Compared to 2019, before the pandemic, the company is still seeing fewer offline customers but its sales have surpassed the same period in 2019 by two digits. Shin Kong Mitsukoshi, therefore, has confidence in the market for the second half of 2022 despite three major factors the pandemic, inflation, and the year-end elections. The company is now keeping a close eye on potential impacts from the three factors, especially the pandemic, which has historically been shown to return during September and October. As for the year-end election in Taiwan, past experiences show that it will impact the number of offline customers for around two weeks to one month. Though borders are still closed, the company is optimistic about its annual revenue given the 100% completion rate of sales targets in the first half of 2022 as long as luxury brands and home appliance brands ensure sufficient stock and raise prices accordingly.

When asked about inflation, Wu mentioned that Taiwan is not as strongly impacted as the world has been. While they do feel some strain from inflation as a department store, the impact is still minor. In fact, Wu expects to see increased sales due to events like the devaluation of the Japanese Yen, which will lead to more products from Japan that are popular among customers.

Richard Wu shared that one of the biggest mentality shifts brought on by the pandemic is that the company now shifts rapidly in response to changes. In addition to the pandemic, inflation, and the election, another major challenge this year will be the impacts of the Quintuple Stimulus Vouchers issued last year. Sales relating to the Quintuple Stimulus Vouchers reached up to NT$3 billion last year. As such, during the annual sales, the company will have to consider how to generate sales equivalent to last year. Before the borders open, Taiwanese people are unable to leave the country and will still need to shop domestically. After borders open, the company will shift gears to target business opportunities from tourists.

Year-on-Year Growth in SKM Pay

Richard Wu expressed that he was very happy with the exponential growth in the company’s mobile payment service: skm pay, stating that this is a testimony to the synergy generated by digital retail, something that they have invested heavily in over the past few years. Their next step will be targeting Gen Y and Gen Z consumers, a group that rarely visits physical stores. The company will continue to research areas that Gen Y and Gen Z consumers are interested in, such as pop culture, arts and cultural exhibits, travel, and finding and ensure sustained growth in this segment through remodeling and additional locations.

Richard Wu shared that Shin Kong Mitsukoshi currently has 15 locations and 150 floors in Taiwan. On average, all stores are replaced once every five years, and the company remodels up to 30 floors each year, which is the equivalent of three department stores. Over the past three decades, the company has opened new locations and closed down old or smaller locations like the one in Hsinchu. To ensure its market share advantage, the company continues to expand vertically and innovate new models. In early 2022, Shin Kong Mitsukoshi opened its first “skm park outlets” in Qianzhen, Kaohsiung and has plans to open its Diamond Towers in the Eastern District of Taipei at the end of the year to expand its presence in younger markets.

Commercial Times
by Li Li-Man
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