Challenger says surge in online sales unable to offset impact from store closures

CONSUMER electronics retailer Challenger Technologies on Tuesday said the "substantial increase" in online orders during the "circuit breaker" period has been unable to offset the impact from the closure of its physical stores amid the restrictions. 

In response to shareholder queries, the group guided for revenue in the first half of FY2020 to be "impacted negatively", due to the decline in sales from its physical stores and trade shows. 

However, based on preliminary estimates - and barring unforeseen circumstances - the management expects the group to remain profitable in the first half, thanks to sales in the months before the circuit-breaker period and the various Covid-19 relief measures by the government. 

Its physical retail stores - both Challenger and PIT.Money stores - have not been allowed to operate since April. Only Hachi.tech, its online tech marketplace, has continued operating to fulfil online orders via delivery. 

While Challenger had established an online retail presence even before the circuit breaker, physical retail sales still formed a significant portion of the group's business. And almost all of its sales come from the local market, said the group in a statement.   

Given the unpredictable nature of the pandemic and the corresponding regulatory changes, Challenger said it is uncertain of the outlook for FY2020, and will continue to be prudent in its management of cash flow and its balance sheet. 

The group further noted that it does not have a formal dividend policy, in response to queries about its cash reserves and dividends. 

As Challenger is not "backed by funds or large corporate or institutional investors with substantial resources which can be tapped whenever there is a need for it", it has been prudent in spending its cash reserves while building its online retail presence. Such reserves will also enable the group to take advantage of opportunities for value acquisitions that would help in its transformation, it noted. 

"Uncontrollable factors and unforeseen circumstances like Covid-19 also require us to have a strong balance sheet and reserves to both survive and remain responsible to the company's stakeholders in a possibly prolonged, ever-changing period of crisis," said Challenger.

The group said it will continue to monitor the sales of both online stores and physical stores, as it is "too soon to make any drastic moves" amid ongoing regulatory changes. At the same time, it is ready to scale up its online operations where necessary.

"Overall, we will continue to expand stores in locations where feasible and cost-efficient to do so, while non-performing outlets will be closed," said Challenger. 

Shares of Challenger closed flat at S$0.46 on Tuesday.