Expectations for a brighter future
In early 2015, AEON Company Limited (AEON Co., Ltd.) decided to buy a 30 per cent of Fivimart and 49 per cent of Citimart. However, AEON did not disclose the value of the deals.
According to the agreement, AEON Co., Ltd. would provide products under its “Top Value” brand to Fivimart and Citimart to distribute, as well as coordinate with them to develop new products and expand supply networks.
Citimart said that the two sides targeted to develop around 500 supermarkets of different sizes by 2025.
AEON Co., Ltd., saw Vietnam as its second most important market in Southeast Asia after Malaysia. It targets to open 200 stores across Vietnam and reach a revenue of JPY100 billion ($836 million).
In 2015,AEON Co., Ltd. general director Motoya Okada stated that Vietnam is a large market and that it will be difficult for the company to succeed without collaborating with local companies.
Thus, through the deals, AEON Co., Ltd. will consume its products, build distribution systems, and develop a number of shopping centres in Vietnam.
Unhappy ending for Fivimart and Citimart?
At the time of the deals, Fivimart and Citimart expressed hope that the co-operation with AEON Co., Ltd. would help to improve their business. However, after two years their accumulated losses have increased.
According to Fivimart’s financial statement, in 2016, it reported VND1.24 trillion ($53.8 million) in revenue, up 20 per cent on-year, however, it also reported a loss of VND96 billion ($4.16 million), doubling the figure in 2015. As a result, throughout two years of cooperation with AEON, Fivimart suffered an accumulated loss of VND173 billion ($7.5 million), reducing its equity to approximately VND30 billion ($1.3 million).
The major reason for the increase in the losses of Fivimart is the soar in management expenditures, which are even higher than Fivimart’s gross profit. Notably, in 2016, the company’s management expenses were up to VND280 billion ($12.1 million), while its gross profit was VND183 billion ($7.9 million).
Citimart’s business results are similar to those of Fivimart. Notably, in 2016, it reported an increase of 15 per cent in revenue to VND1.6 trillion ($69.4 million), however, it was shouldering a loss of VND123 billion ($5.3 million) in 2015 and 2016, reaching an accumulated loss of VND157 billion ($6.8 million).
Along with their massive losses, both Fivimart and Citimart also keep debts of VND1.4 trillion ($60.7 million), including VND700 billion ($30.3 million) by Fivimart and VND710 billion ($30.8 million) for Citimart.
Besides, the two supermarket chains also failed to expand their store chains. Notably, Fivimart currently has 26 supermarkets in Hanoi, four less than its target for last year. The number of Citimart’s store remains the same as last year.