Will China’s sluggish shopper traffic sink BreadTalk in FY17?

It’s shuttered five food atriums in FY16.

There’s life after death for BreadTalk Group (BreadTalk), as the chain’s rationalisation of food atriums is keeping it afloat amid the increasingly sluggish shopper traffic in China.

According to a report by RHB, BreadTalk shuttered five food atriums in 1Q16, and there could be more closures in FY16. RHB asserts that this could lead to more write-offs.

With the closure of non-performing stores, the profitability of BreadTalk’s food atrium division should recover in FY17.

Moreover, BreadTalk’s bakery division is doubling down on its supply chain efficiencies to retain its bottomline amidst a slower expansion pace.

“We understand that the group is in the midst of developing a digital system to reduce wastage and BreadTalk has since seen a 1ppt YoY improvement in EBITDA margin in 1Q16,” RHB notes.

“While weakness in same store sales is likely to persist, we think the improvement in operational efficiencies will help to sustain this division’s operating profit, in absolute figure terms. BreadTalk is also working on product innovation to keep its brand fresh and improve gross margins,” it adds.

Photo: BreadTalk Singapore Facebook