KUCHING: Aeon Corporation (Malaysia) Bhd (Aeon) is slowing down on store expansion in Malaysia in order to capitalise on the growing urban, middle class population.
According to the team over at Hong Leong Investment Bank Bhd (HLIB Research), Aeon will likely lower their pace of store expansions to one shopping mall a year instead of the rate of two it had previously employed.
“The group is scheduled to open Aeon Mall Kempas in Johor Bahru by the third quarter of this year (3Q17) and its first mall in Sarawak will be opening in Kuching during 1Q18,” it said in a report.
Currently, Aeon is purported to be registering an average occupancy rate of over 90 per cent across its 26 shopping malls within Malaysia, most notably the recently Aeon Shah Alam and Aeon Kota Baru launched in 2016 are registering occupancy rates of over 93 per cent.
Despite the high occupancy rates, its retail segment was observed to be dwindling as contributions from its departmental stores contracted as consumer preference shifted to more trendy brands.
HLIB Research explains that Aeon is maintaining its high occupancy rates amidst vast retail space within the market through the sacrifice rental margins which has cause a significant shrink in Aeon’s PM operating profit margin from 38 per cent in 1Q16 to 33 per cent in1 Q17.
“Additionally, as the group is still in an expansionary phase, a margin pressure should be expected but we foresee margins to improve gradually in line with the recovery of consumer sentiment and slowdown of the group’s aggressive expansion,” added the research arm.