Dairy Farm, leading multi-format retailer in Asia, reports sound profit growth of 7% in 2016, despite soft consumer sentiment and intense pressure on pricing in most markets.
Sales, excluding associates and joint ventures, of US$11.2 bn, were 1% ahead of the prior year in US dollar terms and 2% ahead in constant currency terms. The retailer opened 114 net new stores during the year.
Food: large format flat, convenience grew
Sales of US$6.2bn from supermarkets and hypermarkets (excluding Yonghui) were in line with last year in constant currency while operating profit increased by 13% to US$194m. Large formats in Hong Kong, Macau, Taiwan, The Philippines, Vietnam and Cambodia saw positive sales growth, while sales in Malaysia, Singapore and Indonesia were down.
Its 7-Eleven convenience stores reported US$2.0bn in sales, an increase of 5% over the previous year in constant currency terms. Operating profit increased by 15% to US$73m. The convenience format reported like-for-like growth in Hong Kong, South China and Singapore , driven by store expansion, Ready-to-eat ranges, new products and promotions.
Health and beauty: sales up in most markets, except for Malaysia and Macau
Health and Beauty achieved US$2.6bn in total sales, an increase of 4% in constant currency, although operating profit declined 5% to US$175m due to margin pressure and higher rents.
In mainland China, Mannings showed gradual improvement with solid sales growth, particularly in baby care, beauty care and personal care, while the contribution from private label increased. In Singapore, Guardian reported growth in sales, while operating profit also increased with higher gross margins and greater focus on cost and shrinkage management. In Malaysia, Guardian experienced a challenging year with lower sales and operating profit due to subdued consumer sentiment, increased competition and weakness in the ringgit.
Home furnishing and restaurants: strong growth
Home Furnishings again achieved record sales and operating profit during 2016. In constant currency terms, operating profit rose by 12% to US$71m and restaurants business reported US$2.0 billion in total sales, an increase of 7%.
Further investments will be made in the coming year to build a consumer-centric business model with stronger private labels, increased direct and consolidated sourcing, strengthened digital presence and higher efficiency in supply chain.
- Private label: improving local relevance and creating a differentiated assortment
- Direct and consolidated sourcing: consolidating common ranges across business units and simplifying the supply chain to lower cost and improve replenishment frequency
- Store opening and rationalisation: expanding its store networks across formats, and rationalisation where necessary
- Ecommerce: enhancing online shopping experience
- Capability: building capability in key retail functions of merchandising, operations, supply chain, IT and quality assurance
Programme Director, IGD Singapore
Based in Singapore, Shirley heads up IGD's research on Southeast Asia. Contact Shirley at email@example.com for further insight on the region.