Investors take positions as RRHI considers exit from fashion to focus on personal health, pet care

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NEWS OF Robinsons Retail Holdings, Inc.’s (RRHI) plans to exit from the fashion business and instead focus on pet care, health, and beauty products made the company one of the most actively traded stocks last week.

Data from the Philippine Stock Exchange showed a total P628.807 million worth of 8.266 million RRHI shares being traded on the local bourse from July 1 to July 5.

Shares in the retail company closed at P77 apiece on Friday, up 4.05% from its closing price of P74 per share a week ago. Year to date, it is down 5.81%.

“[RRHI] was among the most actively traded stocks [last] week as it plans to shift business to high growth rates such as pets, health and beauty products from the highly competitive fashion branded business as this will improve their margin as well as its SSSG (same-store sales growth),” Diversified Securities Trader Aniceto K. Pangan said in a mobile message.

Jeff Radley C. See, technical analyst at Unicapital Securities, Inc., shared this assessment: “Competition with price is the number one factor that led them to shift business,” Mr. See said in a separate text message.

In a Bloomberg interview published last week, RRHI’s Chief Executive Officer Robina Gokongwei-Pe said the company sees higher returns from pet, health, and beauty products compared to its existing fashion businesses — which she said “has become very difficult” amid shrinking operating margins and growing competition in the market.

The company’s fashion portfolio include the Topshop, Topman and Dorothy Perkins brands. Other businesses in its portfolio include Robinsons Supermarket, Robinsons Department Store, The Generics Pharmacy, South Star Drug, Handyman Do It Best, True Value, Toys “R” Us, Ministop, Daiso Japan, Costa Coffee, and Savers Appliances.

“This year, the company continued to stay bullish as they will be spending up to P5 billion for expansion of their stores,” said Unicapital’s Mr. See.

In May, RRHI disclosed its plans to spend P3.5 billion up to P5 billion in capital expenditures (capex) this year for the establishment of around 120-150 new stores. The higher end of this year’s capex is 13% higher than the P4.4 billion it spent in 2018.

RRHI signed franchise agreements for three new brands in 2018, namely Pet Lovers Centre for pet retail from Singapore, and South Korean brands Arcova for mass merchandise and Club Clio for beauty products.

The company also noted that its subsidiary Robinsons Supermarket Corp. invested P105 million through convertible notes in local tech start-up GrowSari, Inc., which provides grocery delivery services to sari-sari stores.

RRHI is also looking to rationalize the store network of Rustan Supercenters, Inc. (RSCI) following the former’s acquisition of the latter in December last year. The deal placed RSCI’s total network of 80 stores, including Marketplace by Rustan’s, Rustan’s Supermarket, Shopwise Hypermarket, Shopwise Express, and Wellcome, under RRHI’s control.

“Fundamentally, the company has a good business standing especially with its inclusion in the 30-stock index. After its acquisition of the RSCI, the (parent company’s) income was down by 37% for the first quarter thus in the short term, the income will be subdued as it rationalize the recent acquisition of RSCI,” said Diversified Securities’ Mr. Pangan.

“In the long term, the company will continue to grow as it further expand and improve their business,” he added.

RRHI booked a net income attributable to the parent of P827.315 million in the first quarter, down 32% from the P1.211 billion it generated in the same period last year. Excluding RSCI, the company would have booked an eight percent uptick in core net earnings to P1 billion.

Unicapital’s Mr. See noted that even with RRHI’s stock price going down to as low as P68.1 this year, the company continues to declare cash dividends of P0.72 per share this year “which is still good.”

“The stock is currently ranging between P68.1 and P90.00 in the medium term. The stock could have bottomed at P68.1 [in May 14] and could possibly trend up in the short term,” Mr. See said of the stock moving forward.

“Support levels are P73.40 and P68.10. Resistance levels are P79.30, P81.80 and P 85.40,” he added.

For Diversified Securities’ Mr. Pangan: “In the coming weeks, RRHI will continue to go on correction as it continue to rationalize its recent acquisition of Rustans depending on the earnings after first half of 2019. Resistance is P78 while immediate support is P75 per share.” — Marissa Mae M. Ramos