Shocked! Probably, that’s how some stock market investors here may have reacted last week after reading a reputable research firm’s "sell" call on Berjaya Food Bhd; apparently, this was after a ground check of the listed company's local Starbucks outlets showed an alarming decline in foot traffic arising from the ongoing boycott of Starbucks Coffee due to the Israel-Hamas conflict.
The boycotting of “Jews-linked” companies is already proudly in full-swing here and in the local context two of the most high-profile, popular businesses affected by it seem to be McDonald's and Starbucks (both employing thousands of locals); of course, what many of the “boycotters” may be ignorant of is that the two are actually “franchise” businesses and are basically “locally-owned” - with both contributing to the nation's economy.
In truth, the impact of the boycott was always expected but probably what many investors may not have braced for was its intensity and duration, now that it may stretch longer than what was initially projected.
In fact, according to the same report, RHB Research which visited several Starbucks Coffee mall outlets recently during peak hours, had noted the relatively lacklustre foot traffic with an estimated 30- 40 per cent decline in business; this, despite the shopping centres being crowded and most of its competitors observed to be having normal footfalls.
The report added that the situation appears worse than expected, and it may have compelled Starbucks Coffee to be more aggressive in its promotion, which will likely mean significant gross profit margin erosion.
The research firm went on to slash Berjaya Food's forecast financial year 2024-2026 net profit by 21 per cent, 17 per cent and 7 per cent respectively after further toning down its sales growth and gross profit margin assumptions to reflect the subdued sales, increased promotional efforts, and efforts to address the aftermath of the boycott; it also cut its target price for the company by 24 per cent to 46 sen with the stock closing at 59.5 sen a share on 6 December 2023.
It added that the outlook for Berjaya Food has now turned cautious; moreover it said that the post-boycott recovery also may not be that straightforward and it may take the company much effort to regain its market share, in view of the intense competition from others; it further reported that this could also jeopardise it's ambitious expansion plan for an additional 40-50 stores in 2024.
Meanwhile, according to Hype.my, Berjaya Food has apparently been taking a heavy toll from the Starbucks boycott started by Malaysians since last October; unfortunately, in an effort to cushion the impact, the company might be training its sights on its own employees instead.
Based on the article, the company had issued its latest report on earnings ending 30 September, where it had acknowledged the challenging market conditions brought about by the ongoing Middle East conflict; it added that to mitigate some of the challenging market conditions, the group will be focusing on inter alia cost optimization and labour/productivity management.
This of course could mean that the company may be compelled to consider laying off its employees or reducing its outlets operating hours - similar to what McDonald's was spotted to be trying to do earlier?
Like it or not, these measures - a result of the boycott - are already believed to be quietly affecting the livelihood of thousands of Malaysian workers, with loss of income, including the much-needed overtime pay.
Add to that, the escalating cost of living - and higher loan instalments due to the hike in bank lending rates - biting into the budget of those in the B40 segment, the last thing they could afford is a reduced take-home pay! But do they dare to voice out - given the inevitable religious sentiments attached to the boycott?
Meanwhile, according to a NST report on Dec 8, Berjaya Food is keeping mum on its expansion plans and the impact of the ongoing boycott of Starbucks Coffee on its operations and plans; the report also noted that its share price has fallen by a staggering 17 per cent with its year-to-date down more than 40 per cent!
With the call to “sell" a clear body blow to the company's standing and its market capitalization; plus with its business owners opting to remain mum, perhaps its employees (together with those of other companies affected by the boycott) have no choice but to suffer in silence - while waiting for the end of a never-ending war in a faraway land.
Primary Source: NST and Hype.my
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