VF Franchise Consulting

Dairy Farm reports modest growth

Aug 3, 2015


Dairy Farm says it achieved “modest” like-for-like sales growth in most of its major markets in the first half of this year.

However, underlying profit fell 14 per cent to US$193 million, largely due to margin pressures in the food businesses and a disappointing half for its Guardian health & beauty group in Malaysia.

With the early completion of the acquisitions of the San Miu supermarket business in Macau and the Yonghui stake (20 per cent) in China, both in April, sales for the period rose 27 per cent to US$8 billion. But like for like sales rose a more modest three per cent to $6.5 billion, or by seven per cent on a constant exchange rate basis.

Dairy Farm International says that despite solid sales growth, cost pressures and food price deflation on certain commodities combined to squeeze margins in the first six months for the group’s Food businesses.

“In Hong Kong, there were higher rental and labour costs. In Singapore profits were significantly lower due to competitive pressures, higher rents and a weaker Singapore dollar. Sales were buoyant in Malaysia, but there was continued margin investment to attract customers,” said chairman Ben Keswick in his half yearly report.

“There was good like for like sales growth in Indonesia, but profitability declined materially due to higher labour costs following a further increase in the minimum wage, a rise in shrinkage costs associated with greater fresh sales and more rigorous stock management, and store rationalisation.

“In the Philippines, the upscale and community supermarkets enjoyed sales growth, but the hypermarkets struggled.”

Dairy Farm’s convenience store businesses in Hong Kong and Macau performed satisfactorily. Sales in Singapore, however, were weaker due to a reduction in the number of stores and the impact of recently introduced regulations restricting late night sale of alcohol.

The Health & Beauty division produced higher sales. Hong Kong and Macau performed well despite some impact from a decline in tourist arrivals. In mainland China, there was further growth in the store base and an improvement in results. In Malaysia, profitability was lower following the introduction of GST on 1st April. In Indonesia, the results were impacted by wage and rent increases, while sales growth remained good. In the Philippines progress was made on the integration of Rose Pharmacy.

In Home Furnishings, the IKEA stores in both Hong Kong and Taiwan traded well, and the new IKEA store in Indonesia continues to perform in line with expectations.

In the Restaurant division, Maxim’s maintained its consistent performance with increased sales and profits in Hong Kong and mainland China. The group is growing its presence in Mainland China and continuing to expand its Starbucks network in Vietnam.

At the end of June, Dairy Farm operated over 6400 outlets across all formats, including the newly added San Miu and Yonghui stores, and employed in excess of 170,000 colleagues.

Source: insideretail.asia

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