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Penshoppe, Bench cite strong sales, but profits likely to get hit


TWO OF the country’s leading apparel companies have not been spared by rising input costs that have afflicted businesses this year. The makers of Bench and Penshoppe brands continue to experience strong sales, although profits are likely to take a hit. Bernido H. Liu, president and chairman of Golden ABC, Inc., the company behind the Penshoppe brand, said sales have not been as bad, but profits have been affected. "I think everybody got hit. I have yet to meet a businessman who says he is doing great. If you don’t get hit at your revenues, you get hit at your earnings," he said in an interview. Golden ABC hopes to grow by 10% this year, which is going to be challenging, Mr. Liu said. But if the company misses its target, he expects the firm to still post high single-digit growth. Based on its audited financial statements filed with the Securities and Exchange Commission (SEC), Golden ABC posted P1.37 billion and P36.27 million in revenues and net income, respectively, last year. Without providing figures, Mr. Liu said Golden ABC has absorbed higher costs since consumers may not be able to bear any substantial price increases. Mr. Liu said the company, which has 400 outlets nationwide, had opened up to 20 stores this year, with several more planned before the year ends. He said this is fewer than in 2007, when they opened 20 stores in the fourth quarter alone. Mr. Liu said Golden ABC is interested in acquiring more brands, aside from creating new ones to complement their product lines. He declined to identify what companies and brands they were eyeing, but said some deals have been concluded, others are in the pipeline, and a few more were being negotiated. Aside from acquisitions, Mr. Liu said they were in talks with potential franchisees in Southeast Asia and the Middle East. He added that the firm had overhauled its management team in China, where they hope to increase their stores from three to 20 in the next two to three years. The company would however be cautious in expanding overseas, knowing the huge capital needed to compete with more established international brands. "Here, I can launch a successful marketing campaign with $1 million, but abroad that’s just a drop in the bucket," Mr. Liu said. Meanwhile, Bryan C. Lim, vice-president for operations of Suyen Corp., the company behind the Bench brand, said margins would be affected as malls go on sale more frequently. He declined to provide figures. He noted that while people can still afford to spend, the tendency is to hold out for bargains especially with the holiday season nearing. "With all that has been happening, people will naturally hold on to their money even if they can cope," he said in phone interview. The company’s audited financial statement submitted to the SEC showed it had posted P4.29 million in profits and P1.65 billion in sales last year. Mr. Lim said they were not revising their targets since they would likely to perform better in the last three months. But the traditionally strong fourth quarter may be weaker compared with previous years. "Filipinos get into a gift-giving mode during the Christmas season, but they might shift to less expensive items given the conditions today," he said. Without giving specifics, Mr. Lim said production costs have increased a little, resulting in a price hike for Bench apparel. Among the firm’s production expenses, distribution costs have increased the most due to higher fuel prices, he said. Mr. Lim said retail sales would still be strong this year, even as he hoped that conditions would improve next year. He said the firm has opened up to 40 stores this year, more or less the same number of outlets they put up in 2007. The firm has 563 stores nationwide. Suyen Corp. is negotiating with several foreign companies so it can use the imported brand in Southeast Asia, he said. Analyst has said overseas expansions were likely to be tempered by tightening credit markets, which would slow business activity. A Makati Business Club survey earlier showed that local businessmen think the country would slide into a recession next year. On the flip side, the weakening peso against the dollar has somewhat energized the families of Filipinos working overseas, since that allows them to buy more local goods. The Nielsen consumer confidence index for the second half showed that mid-income Filipinos feel it is a good time to spend, even if almost three-quarters felt the country was already in a recession, and half saying a recovery was unlikely next year. The study traced Filipinos’ sunny outlook to falling consumer prices and stronger dollar remittances. The study found that Filipinos were using their spare cash to go on vacation, improve their homes and buy clothes. - BusinessWorld

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