Dairy Farm trading update

Date : 05 November 2015

Pan-Asian retailer Dairy Farm has revealed that softer sales growth, combined with rising costs and unfavourable exchange rates, has resulted in weaker margins than expected for the third quarter of 2015.

Challenging food performance in South East Asia

Dairy Farm's food business has had mixed fortunes, with satisfactory results in north Asia, offset by difficult trading conditions in South East Asia:

  • Singapore - weaker performance of newly opened Cold Storage supermarkets, plus alcohol restrictions on 7-Eleven stores have impacted profitability
  • Malaysia - weakened consumer confidence and the introduction of GST has led to weaker consumer spending
  • Indonesia - good sales growth being offset by rising labour costs and increased investment in price

Dairy Farm has seen positive contributions from its recent investments into Yonghui in China and San Miu in Macau. The retailer plans to invest a further US$210m in Yonghui in 2016 as to maintain its 19.99% stake, following a placement by Yonghui of a 10% stake in online marketplace JD.com.

Health & Beauty performance pattern matches that of food

As with the food business, the Health and Beauty Division saw mixed results across north and south Asia. Performance was positive in Hong Kong and Singapore, however the divisions results were held back by Malaysia and Indonesia. Both the IKEA and Restaurants division increased sales and profitability.

Investing in long-term future

Dairy Farm expects trading conditions to remain tough for the rest of its financial year, but remains committed to building market share and investing in the business for long-term growth.

IGD recently visited one of Dairy Farm's Giant Ekspres supermarkets in Indonesia to see how the retailer is positioning the banner and investing in price - click here for the full report