A.S. Watson China Slips 23%

International retailer A. S. Watson recorded its worst performance in nearly five years last year in China with revenue of HK$17.58 billion ($2.23 billion), down 23% year-on-year.

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On March 16, A. S. Watsons' parent company, CK Hutchison Holdings Limited, released its 2022 financial results. The data showed that Watsons' total global revenue last year was HK$169.6 billion ($21.61 billion), with China's market revenue at HK$17.58 billion ($2.23 billion), recording its worst performance in nearly five years.

According to public information, CK Hutchison Holdings Limited operates a variety of businesses including ports and related services, infrastructure, retail, telecommunications and others. Within its business system, the retail division, where the A.S. Watson Group is located, plays a significant role. A.S. Watson accounts for 37% of the company's total revenue in 2022. A.S. Watson is also the world's largest international retailer of health and beauty products. It has a significant presence in the global beauty retail sector.

By the end of 2022, Watsons managed 12 retail brands. It enjoys 16,142 shops in 28 markets worldwide in 2022 with 256 fewer shops than in the previous year. It has 141 million members, a decrease of 1 million from 2021. In its earnings report, CK Hutchison Holdings Limited said the decrease in shop count was mainly due to Watsons' consolidation of loss-making shops, especially those in Mainland China affected by the pandemic.

The figures show that in 2022, A.S. Watson's group revenue will be HK$169.6 billion ($21.61 billion), down 2% year-on-year, while EBITDA (earnings before tax, interest, depreciation and amortization) was HK$14.31 billion ($1.8 billion), down 11% year-on-year to the level in 2020.

Overall, in 2022, Watsons' European business performed well, except in China, which was severely affected by the pandemic. Its business in Asia also recovered further in the second half of 2022. Its increased shop traffic also drove a rebound in sales.

In 2022, Watsons Health & Beauty Europe revenue and EBITDA (earnings before tax, interest, depreciation and amortisation) reached 10.3% year-on-year shop sales growth, despite a small decline of 1% and 5%.

In Asia, Watson's Health & Beauty business continued to improve, adding 143 shops in 2022, with revenue of HK$30.72 billion ($3.9 billion), up 12%, and EBITDA (earnings before tax, interest, depreciation and amortization) of HK$3.04 billion ($387.3 million), up 21%, as well as year-on-year shop sales growth of 21.3%.

Watsons, a beauty retail giant, was also hard hit by the recurring epidemic in the country in 2022, which had many negative effects on the economy and weakened cosmetics consumption, as well as brick-and-mortar retail.

According to the financial report, Watsons' business in China was severely affected by the ongoing restrictions against the epidemic in 2022, with 590 shops suspended in the first half of 2022 and more than 1,000 shops closed by late November, before fully reopening for business in January 2023.

The forced closure of a large number of shops has also had a serious impact on Watsons China's performance. Last year, both Watsons China revenue and EBITDA (earnings before tax, interest, depreciation and amortization) fell the most in almost five years, declining more than in 2020 (-19%). In terms of revenue size, 2019 was the peak of the last 5 years reaching HK$24.59 billion ($3.13 billion)

In 2022, A.S. Watson China's revenue was HK$17.58 billion ($2.23 billion), down 23%, and EBITDA (earnings before tax, interest, depreciation and amortization) was HK$1.09 billion ($138.9 million), down 59%. The number of shops shrank by 343 from 4,179 in 2021 to 3,836, down 8%. Its shop sales declined by 18.3% year on year.

However, Watson still has outstanding performance in 2022. In this earnings report, CK Hutchison Holdings Limited mentioned that although there was a significant drop in year-on-year shop sales, Watsons also made up for the drop in shop footfall to some extent through online sales, with online sales participation rising from 27% in 2021 to 40% in 2022.