BJFood Revenue Faces Decline In Fy2025 Amid Boycott, Stiff Competition - Analysts

KUALA LUMPUR, Aug 28 (Bernama) -- Berjaya Food Bhd (BJFood) is expected to see a revenue contraction in the financial year 2025 (FY 2025) due to sluggish sales recovery from a prolonged boycott and increased competition from established and new coffee chains, CIMB Securities Sdn Bhd reports.

In a research note, CIMB highlighted that this forecast holds despite BJFood's plans to open new stores in Malaysia and the Nordic market next year.

The firm noted that BJFood permanently closed three Starbucks outlets and temporarily suspended operations at 25 underperforming stores in the fourth quarter (4Q) of FY 2024 due to the ongoing boycott.

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These closures contributed to a 5.8 per cent quarter-on-quarter decline in revenue, bringing it down to RM130 million in 4Q FY 2024.

"For FY 2024, revenue fell by 34.6 per cent to RM730.3 million, mainly due to lower sales following the onset of the boycott in 2Q FY 2024," it said.

As of 4Q FY 2024, BJFood operates 408 Starbucks stores and 60 Kenny Rogers Roasters outlets in Malaysia.

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However, CIMB noted a narrowing of BJFood's core net losses to RM0.1 million in 4Q FY 2024 from RM31.1 million in 3Q of FY 2024, after excluding exceptional items totalling RM38.1 million. 

This improvement was attributed to better profit margins following the closures of non-performing Starbucks stores.

"This brought FY 2024 core net losses to RM38.5 million, outperforming our forecast and consensus estimates of RM64 million and RM62 million, respectively," CIMB added.

CIMB has revised its FY 2025 core net loss estimate down by 34 per cent to RM17 million and increased its FY 2026 core net profit estimate by 24 per cent to RM19 million, reflecting higher profit margin assumptions. 

Despite these adjustments, CIMB maintained a "sell" rating and raised its target price to 38 sen.

In a separate analysis, Hong Leong Investment Bank Bhd (HLIB) noted that BJFood's sales recovery is expected to take time, especially given the persistent Israel-Palestine conflict.

HLIB pointed out that the group has paused business expansion, resulting in no new store openings for the quarter.

"FY24 registered a total of 408 Starbucks stores, with three permanently closed during the quarter. The group also temporarily closed 25 inactive stores.  

“To mitigate challenging market conditions, the group is focusing on cost optimisation, labour productivity and effective marketing strategies," it said.

HLIB subsequently revised its FY 2025 and FY 2026 forecasts downward by 35 per cent and 7 per cent, respectively, and maintained a "sell" rating with a lower target price of 20 sen.

-- BERNAMA