Aeon: We're not closing down Quill City Mall outlet

PETALING JAYA: Aeon Co (M) Bhd has refuted market talk of an impending closure of its outlet at Quill City Mall in Kuala Lumpur, which has underperformed its peers in the challenging market environment.
In an email reply to SunBiz, Aeon said it is in the midst of refurbishing and upgrading its existing malls and stores while expanding its customer experience throughout the country by setting up new malls, with the latest being the one in Bandar Dato’ Onn, Johor Baru.
“For the moment, we do not have any plans to close down any of our operations including Quill City. We believe in the importance of growing our brand irrespective of the uncertain economic situation as we are committed in offering continuous customer experience,” Aeon noted.
The retailing group highlighted that its revenue growth remains commendable, albeit the poor consumer sentiment due to the rising cost of living that has affected all sectors of the retailing business, thanks to customer loyalty and the group’s ability to deliver quality customer shopping experience.
“The group acknowledges that the retail market performance would be dependent on both the external and internal economic factors, including the ringgit performance which will affect consumer sentiment,” it said.
Currently Aeon operates 27 malls, 34 outlets and three MaxValu supermarkets throughout the country.
For the first half ended June 30, 2017, Aeon’s net profit was flat at RM47.96 million compared with RM47.78 million in the same period last year. This was on the back of a 1.4% rise in revenue from RM2.05 billion to RM2.08 billion.
Located on Jalan Sultan Ismail, Quill City Mall is owned by Quill Retail Malls Sdn Bhd. The mall opened its doors in October 2014, with a net lettable area of 800,000 sq ft.
Besides Aeon, which is an anchor tenant, Quill City Mall’s other main tenants include H&M and GSC cinemas. It has over 180 tenants, according to its website.
Checks with the Companies Commission of Malaysia show that Quill Retail Malls reported a widened net loss of RM35.25 million for the financial year ended Dec 12, 2016 against RM32.41 million a year ago.
According to a property consultant who declined to be named, the crowd at Quill City Mall is not as big as in other malls due to difficult accessibility to the complex.
“It is not just affecting Aeon, but also other tenants. It’s not so much on location, but inaccessibility. Not easy to access because it is at the ‘wrong’ side of Jalan Sultan Ismail,” he said.
Last June, Aeon announced that it was selling off its Aeon Mahkota Cheras Shopping Centre and the freehold land on which it sits for RM87.8 million, in a bid to focus on developing its future retail business.

In addition, the group aborted its land acquisitions in Sungai Petani (Kedah) and Senawang (Negri Sembilan) last year, and most recently in Batu Pahat (Johor). It also terminated a tenancy agreement for a yet-to-be-built mall in the face of the current challenging environment.
Aeon said in its 2016 annual report that the group’s strategy is to maintain a good balance between pursuing growth and stability under the challenging environment. The group has reorganised and consolidated its development portfolio, exercising restraint and reviewing development plans.
Property consulting firm VPC Alliance (Malaysia) Sdn Bhd managing director James Wong noted that the retail market is currently bogged down by oversupply, leading to stiff market competition.
“Because of the serious competition, the retail margins are now lower. But at the same time, the landlords want to maintain or increase the rental upon renewal.”
He also highlighted that high cost of living has eroded purchasing power. “The annual wage increments and bonuses are not keeping pace with the cost of living. So the purchasing power and the propensity to spend are less, thus affecting the retail market.”
Given the sluggishness in the retail market, Wong said, rumours have mounted over the exit of foreign retail players from Malaysia.
“Also, a lot of big retail players prefer to rent rather than buy land and invest in the construction of the retail malls.”
Meanwhile, CBRE-WTW managing director Foo Gee Jen did not rule out the possibility of more retail closures going forward given the stiff competition and the market might take one to two years to recover if the cost of living remains at a high level.
“If the situation gets worse, the businesses might fail to survive even if given free rental as they still have other overhead expenses.”