Pan Asian retailer Dairy Farm announced half year sales results of US$6bn, an increase of 10%. However, net profit declined 5% to US$228m.
Food businesses report decline in profit
Solid like-for-like sales in most of its major businesses supported Dairy Farm's double digit sales growth. Its domestic market Hong Kong performed particularly strongly, with Wellcome supermarket's Chinese New Year performance a key highlight.
Whilst Dairy Farm's grocery formats across Asian markets delivered a sales increase, this division reported an overall decline in profit. In Malaysia more aggressive promotion activity impacted profitability, in Taiwan increased competition posed a challenge, whilst in Indonesia a significant increase in minimum wage as well as currency exchange rates affected profit contribution.
The Group's health and beauty produced a more robust performance; Mannings in Hong Kong and Macau contributed strong results, whilst in mainland China rationalisation of the store network paid off in an improved performance.
Outlook for the second half: challenging conditions remain
Despite ongoing challenges in its operating markets, Dairy Farm is building brand strength, enhancing its product offerings, streamlining its supply chain and expanding its store networks. All these factors will bolster long term growth.
In June Dairy Farm opened its first convenience stores in Malaysia, operating under the 'G EKSPRES' banner, expanding its format portfolio beyond supermarkets and hypermarkets. To read more about its expansion plans in the market click here.
Other key developments include the construction of Dairy Farm's first IKEA in Indonesia, to open in 2014, and the promising early performance of the Starbucks franchise in Vietnam.
Commenting on the interim results, Chairman Ben Keswick said "While trading conditions remain challenging in some areas, progress is being made in addressing margin pressures and the Group continues to invest for long-term growth in all its key businesses. After a weaker first half, the outlook is for a modest improvement in the remainder of the year".
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