Isetan Singapore expects Covid-19 to hit financial performance, no recovery in 2020

JAPANESE department store operator Isetan (Singapore) expects the ongoing pandemic to have a negative impact on its financial performance, with no material recovery expected this year, given that the retail environment remains "very challenging", it said on Friday night.

In an update on the impact of the Covid-19 pandemic on the company, it said that the damage to its bottom line has been mitigated by government grants, rental rebates from landlords and income from the recognition of net investment in subleases when available.

"However, these items may not recur moving forward, and the company's focus is on improving its operational performance for long-term business sustainability," it said.

Isetan said its business has not returned to pre-Covid-19 levels, due to factors such as lower customer traffic, social-distancing measures, poorer consumer sentiment and the disruptive impact of ongoing renovations at Isetan Scotts.

Revenue from sale of goods and consignment income have both continued to be negatively impacted. Rental income from the property and retail segments is also down from the previous year.

For its retail segment, Isetan has taken mitigating action such as scaling up its e-commerce business, resuming key sales events in stores, and controlling costs. It also aims to complete renovations at Isetan Scotts by the end of this month so it can catch the wind from the year-end festive-season sales.

For its property segment, Isetan is working closely with existing tenants and looking for potential tenants to fill up vacant units, "to secure as much future rental stream as possible".

"However, headwinds are expected for the segment due to weaker demand for space and the negative impact of the pandemic on retail businesses in general," it added.

Isetan said that with its strong cash and cash equivalents and other investments at amortised cost holdings, it does not foresee difficulties meeting its near-term obligations.

It reminded shareholders and potential investors to exercise caution when dealing or trading in its shares.

Isetan shares closed unchanged at S$2.85 on Friday before the business update.