TAIPEI: Shares for Gourmet Master Co Ltd, best known for its coffee shop and bakery chain 85°C, rose 9.68 percent yesterday after the company’s net income surged more than 20 times last quarter from last year.
The company said net income hit a record level of NT$185.64 million (US$57 million) in the April to June quarter, compared with NT$8.597 million in the same period last year. Earnings per share were NT$1.32 last quarter, up from NT$0.06 on the previous year.
That sent the company’s shares to close to NT$153 yesterday on the Taiwan Stock Exchange.
The stock has plunged 41.88 percent over the past year, underperforming the broader market’s 8.39 percent decline, as the company suffered with its inability to pass on rising costs, as well as the negative impacts of last year’s food safety issue and the weaker-than-expected macro economic environment.
Gourmet said in a statement that the last quarter’s earnings were its best since listing on the local exchange in 2010 and the first profitable April-to-June period.
The company attributed the last quarter’s growth to significant savings in labor and rental expenses, while overall operating efficiency improved with the introduction of new information systems allowing for real-time monitoring of its stores and inventories, according to a statement.
Sales in the second quarter grew 15 percent year-on-year, but receded 0.7 percent quarterly to NT$4.7 billion, with a gross margin of 57.9 percent and an operating margin of 7.5 percent, Gourmet said.
In the first seven months, cumulative revenue totaled at NT$11.2 billion, up 14 percent year-on-year, with sales contributions from China accounting for 72 percent of its overall sales, the company said.
In the second half, the company expects operating margins to continue improving on higher utilization of its central kitchen facilities in China and the US. The profitability outlook will be boosted by the mooncake season next month and the traditional year-end high season, the company said.
“We are upbeat about the strong uptick in operating margin, which rose to 7.5 percent last quarter from 6.6 percent in the previous period, especially during the slow season, during which we typically see the figure decline,” CIMB Securities Ltd analyst Jack Lin said in a note on Tuesday.
In addition, the company is to remain relatively unaffected by the recent weakening of the Chinese yuan, as the New Taiwan dollar has been depreciating in a similar trajectory, Lin said.
However, HSBC analysts Chloe Wu and Jane Liu are cautious about the company’s earnings outlook, saying that Gourmet booked a loss of NT$85 million last quarter by closing several non-performing stores.
“We are positive about Gourmet Master’s cost control policy, but sustainability could be more important,” Lin and Wu said in a client note yesterday.
Separately, Gourmet yesterday said in a Taiwan Stock Exchange filing that board director James Hsieh had resigned for personal reasons.
Hsieh, former president and chief executive officer, stepped down in April from the post amid market concerns about the company’s poor execution of new business initiatives.
