Parkson on Friday filed an application to Ho Chi Minh City authorities for voluntary bankruptcy proceedings, marking the end of the luxury department store chain's 18-year journey in Vietnam due to multi-million dollar losses.
Singapore-headquartered Parkson Retail Asia Limited, the parent firm of Parkson Vietnam, said Parkson Vietnam has historically been operating at a loss.
Such losses compounded in recent years due to challenging business environments as a result of the Covid-19 pandemic, while Parkson Vietnam’s landlord offered lackluster support, including negligible rental rebate or rental reduction during the lockdown when activities were restricted, it said. The government’s high land tax also added a further burden to Parkson Vietnam’s finances.
As a result, Parkson determined it is not commercially feasible to continue Vietnam operation, in line with Parkson’s focus on Malaysia. The bankruptcy application is subject to approval from Vietnamese authorities.
The exact financial impacts of the move can only be determined for the current financial year ending December 31, 2023, upon the approval of the application, the firm said.
In Vietnam, Parkson recorded a before-tax loss of SGD2.3 million ($1.7 million) on a revenue of SGD2.4 million ($1.79 million) in the financial year ended December 31, 2022. In 2021, the before-tax profit was SGD13.7 million ($10.24 million) on a revenue of SGD10.1 million ($7.55 million), thanks to the closure of two stores and exit of tenants.
As of end 2022, Parkson Vietnam has capital deficiency of SGD30.17 million ($22.56 million), while the current liabilities exceeded the current assets by SGD37.83 million ($28.29 million).
Parkson was among the first foreign retailers in Vietnam, with the debut of its first Vietnam facility in HCMC in 2005. It then expanded to other cities including Hanoi and Hai Phong. Currently, there is only one Parkson department store in Vietnam, at 45 Le Thanh Ton street, District 1, HCMC.
The retail market in Vietnam has shown strong prospects. According to McKinsey, the ratio of Vietnamese people with spending of $11-30 a day increased from 16% in 2010 to 36% in 2020 and might go up to 54.8% in 2030.
Trang Le, head of research and consulting of consultancy JLL Vietnam, said the ratio of Vietnamese citizens with high spending of over $70 per day grew from 1% in 2010 to 4% in 2020 and might hit 19.2% in 2030.
With such a pace, about 36 million Vietnamese people can join the middle class in the coming decade, she added.