Can Jumbo sustain robust sales amid increasingly sluggish Chinese economy?

It's got a few tricks up its sleeve.

Jumbo is unfazed by China's slowing economy and the overall global uncertainty pervading the global business landscape, according to a report by UOB Kay Hian (UOB KH).

Management indicates that over the last few months, they have seen higher-than-usual per pax spending in the IFC outlet in Shanghai. This may be due to the 10% service fee and a clientele comprising deep-pocketed executives and businessmen that are less sensitive to price changes. If this trend sustains, IFC will be mirroring the success of Jumbo's first Shnaghai outlet at iAPM mall.

Moreover, Jumbo has adopted a more prudent capital expenditure plan, and indefinitely deferred its plans to purchase a building to house the central kitchen as the company has been unable to find a suitable location.

Meanwhile, Jumbo has seen a small uptick in consumer spending in Singapore outlets since the start of 2016. This is due partly to the increased visitor arrivals in January, and partly to strong Chinese New Year (CNY) sales. Channel checks reveal a 10-15% spike in set menu prices during CNY. Thanks to this, UOB KH sees a more robust Q2.

"Our conviction in the free cash flow generating abilities of the company through its destination dining concept is further strengthened by the resilient spending in the Singapore and Chinese outlets amid a challenging time for F&B players due to manpower shortages and high costs of business," asserts UOB KH.

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