Massive Warning From Parkson Retail Group!

Read the following article published on Business Times: Parkson plans aggressive promotion in China

• Parkson plans aggressive promotion in China
  
  Published: 2008/11/15
  
  PARKSON Retail Group Ltd, the Beijing-based department store chain controlled by Malaysia’s Lion Group, plans aggressive promotions at some stores to combat an expected slowdown in consumer spending in China.
  
  The promotion will be introduced in China’s export-driven coastal region which will be “badly affected” by any recession in developed countries and where unemployment is expected to rise, the company said in a release to Hong Kong’s stock exchange yesterday.
  
  Consumer spending may be hurt in China as economic growth weakened to 9 per cent in the third quarter, the slowest pace in five years. Growth in the retail industry is expected to “moderate” as the global financial turmoil will slow wage and economic growth in China, Parkson said.
  
  “More job losses and the slowing economy are hitting consumer spending,” Fiona Wong, Hong Kong-based consumer analyst at Sun Hung Kai Securities, said before the earnings announcement. “I would be quite worried about their fourth-quarter sales performance.”
  
  The company said the measures were aimed at combating short-term challenges as it believes the Chinese government’s 4 trillion yuan (US$586 billion) stimulus package aimed at sustaining growth “will take time to materialise”.
  
  The retailer said third-quarter profit rose 27 per cent to 190.3 million yuan (US$28 million) as sales rose 23 per cent to 2.4 billion yuan. Same-store sales grew 14.4 per cent.
  
  Profit for the first nine months of the year rose 36 per cent to 608.9 million yuan, as sales rose 23 per cent to 7.6 billion yuan.
  
  The supermarket operator has bought out partners this year and said in May it will buy stakes in two stores from parent Parkson Holdings Bhd for 240 million yuan. - Bloomberg

Definitely not looking good at all for Parkson and if I remember correctly, Parkson has always been priced as a super growth stock commanding a very much higher earnings multiple for its stock price. Now the company itself is declaring that it plans an aggressive promotion to combat the slowdown in consumer spending! And if this is the case, I reckon Parkson could be re-rated much lower as it would lose its super growth stock status and it would also lose its command of its high earnings for its stock price!