Aeon plans lower capital spending this year

KUALA LUMPUR: Aeon Co (M) Bhd has allocated a capital expenditure (capex) of RM500 million for the financial year ending Dec 31, 2017 (FY17), compared with RM700 million in FY16, mainly for the opening of the Aeon Mall Kempas in Johor Baru by third quarter this year and the refurbishment of its Aeon Queensbay store in Penang.

The group is also embarking on a revamp of its Aeon Taman Maluri Shopping Centre in Cheras.

Commenting on the lower capex this year, Aeon executive director Poh Ying Loo said the group has realigned its development portfolio in the current challenging business environment.

“An investment into the capex is an investment into the future. For the last two years, we’ve built stores such as the Aeon Mall Shah Alam and Aeon Mall Kota Baru. Going forward, we will refurbish our stores selectively,” he told a press conference after its AGM yesterday.

Poh added that refurbishment is a continuous exercise that the group will undertake as the mall ages, to refresh it to provide a new customer experience.

The group sees the retail business and consumer sentiment to remain soft this year due to uncertainties in the economic environment, such as higher cost of living and the weakening of ringgit.

Managing director Shinobu Washizawa said despite the soft sentiment, it will stimulate customers’ demand by changing the merchandise assortment and introducing a new model in its store this year (Aeon Mall Kempas) to provide a refreshing shopping experience.

As at Dec 31, 2016, the group operates 33 departmental stores-cum-supermarkets. It also manages and operates 26 shopping malls. At present, the stores and malls are diversely spread out geographically in Peninsular Malaysia.

Poh said Aeon Mall Kempas involves an investment of RM300 million, both for the acquisition of land and development of the mall.

Aeon is expected to open its first mall in Kuching by first quarter of 2018 on a RM60 million investment.

Meanwhile, Poh said Aeon’s e-commerce journey is still in its infancy in Malaysia. Aeon has an online channel Shoppu.com.my, but its contribution in FY16 remained marginal. The group is currently working towards building up the business with an aim towards omni channel level in the future.

The group had aborted its land acquisitions in Sungai Petani and Senawang last year, and most recently in Batu Pahat. It also terminated a tenancy agreement for a yet-to-be-built mall in the face of the current challenging environment. Poh said the group is not closing any stores at this moment, but continues to monitor the situation.