Dairy Farm: H1 sales down 9%

Date : 30 July 2020

Charles Chan

Senior Retail Analyst

Dairy Farm has released its H1 results for the six months ended 30 June. Consolidated sales including 100% of associates and joint venture increased 6% to US$14,547m, but subsidiary sales fell 9% to US$5,240m.

Overall performance mixed

Sales by the Group’s subsidiaries fell mainly due to the annualised impact of the stores closures in 2019 under the Group’s space optimisation plan in Southeast Asia, as well as reduced revenues from Convenience Stores and Health and Beauty as a result of COVID-19-related restrictions. There were, however, strong performances from the Grocery Retail and Home Furnishings businesses.

Improving trends in Grocery Retail

The Grocery Retail business reported strong like-for-like sales and strong profit growth during the period. Singapore and Malaysia maintained its strong turnaround momentum and the Group’s space optimisation plan both made a positive contribution. The performance of new upscale formats and refreshed stores in Southeast Asia was also encouraging.

However, market conditions in Indonesia remain challenging. Annualised impact of store optimisation, plus strict social restrictions and local travel bans because of COVID-19, meant customers increasingly switched to convenience and proximity shopping.

COVID-19 impacts Convenience Stores

The Convenience Stores business was affected by movement restrictions and physical distancing requirements, as well as temporary store closures on the Chinese mainland and reduced customer numbers in Hong Kong and Singapore. As various lockdown restrictions eased, performance improved, especially the Chinese mainland. Recovery in Singapore remains behind north Asia.

Health and beauty momentum disrupted

The Health and Beauty business was impacted significantly by the pandemic and the various restrictions to contain it. The performance of Mannings in Hong Kong for example was affected by a continuing lack of overseas tourism.

Home Furnishings and restaurants: contrasting results

Sales in the Home Furnishings business (IKEA) were higher than the equivalent period last year, supported by strong ecommerce growth and the annualised impact of new stores opened in the prior year. Maxim’s, the Group’s 50%-owned associate, reported a loss for the period. It was significantly affected by a substantial reduction in restaurant customers and some temporary closures of its outlets.

Other recent developments

“Committed to its multi-year transformation plan”

Dairy Farm’s Chairman, Ben Keswick, said, “Overall profits were significantly lower in the first half due to reduced contributions from Health and Beauty, Maxim’s and Convenience Stores as a result of COVID-19 and its impact on customer behaviours. There were, however, strong performances from the Grocery Retail and Home Furnishings businesses. Trading conditions in the second half are expected to continue to be challenging, but we are confident in the strength of Dairy Farm’s businesses and remain committed to its multi-year transformation plan.”

Want to know more?

Dairy Farm’s five strategic priorities:

  • Maintain strength in Hong Kong
  • Grow in China
  • Build capability
  • Turnaround Southeast Asia
  • Drive digital innovation

Visit our dedicated page for insight and latest developments for Dairy Farm here.