Dairy Farm FY18 results: sales up 4%

Date : 28 February 2019

Dairy Farm has reported its 2018 annual results. Performance of its Health and Beauty segment was strong, but its Food business saw further decline.

Annual sales up 4.1%

Dairy Farm posted sales growth of 4.1% to US$11.7bn for the fiscal ending. Consolidated sales including joint ventures and associates increased 0.6% to US$21.9bn. During 2018, the retailer sold its Giant hypermarket store in Vietnam to Auchan. It also acquired the remaining 51% share in Rose Pharmacy and sold Rustan's in exchange for a 18.25% stake in Robinsons in the Philippines.

Food: large formats struggling, convenience remains robust

Sales from supermarkets and hypermarkets (excluding Yonghui) declined -2.1% to US$5.9bn from previous year in constant currency. Performance of its large formats remain a concern, especially in Southeast Asia. Sales and profits from Giant supermarkets and hypermarkets in Singapore, Malaysia and Indonesia declined. While supermarket sales in Hong Kong increased, rising rental and labour costs impacted profitability. Sales and profit were also lower in Taiwan. 

Its 7-Eleven convenience business (Hong Kong, Macau, Singapore and operations in southern China) reported sales of US$2.1bn, up 4% from previous year in constant currency terms. Operating profit increased by 8% to US$92m. Ready-to-eat continued to drive sales in Hong Kong and Macau, while in mainland China, it surpassed 1,000 stores. 7-Eleven Singapore posted a slight fall in total sales after closing a few stores.

In China, the retailer's key associate business, Yonghui, maintained strong sales momentum and continues be one of the fastest growing retailers in the market. For 2018, it posted sales growth of 23% to US$7.4bn, mainly driven by new store openings.

Health and beauty: sales and profit up

Like the last few years, the Health and Beauty (effectively led by Guardian and Mannings) division performed strongly, with sales increasing 16.9% to US$3bn and operating profit rising 59% to US$334m. It continued to perform strongly in Hong Kong, recorded significant sales increase in Southeast Asia and increased penetration of Beauty and Own Brand.

Home furnishing and restaurants: solid sales growth

Home Furnishings (Ikea in Hong Kong, Taiwan and Indonesia) continued to achieve solid sales growth, posting 10.4% growth to US$721m. This was supported by strong ecommerce growth and the opening of a new store in Hong Kong. Further expansion has been outlined, with new stores expected in Indonesia and Taiwan.

Dairy Farm's restaurants business and key associate, Maxim's reported a 15.5% sales increase to US$2.5bn. This was supported by new franchises and mooncake sales surpassing last year's record.

Growing store network

Dairy Farm (including associates and joint ventures) added 2,567 stores to its network, ending 2018 with 9,747 stores. The key growth channels (in store numbers) were convenience (+673), supermarket (+593) and health and beauty (+578).

Future outlook

Looking ahead, the retailer’s multi-year transformation plan is in progress under new leadership. It hopes to see the benefits of restructuring its food business following completion of the strategic review.

Chairman of Dairy Farm, Ben Keswick, said, "With a more customer-focused and market-driven strategy we will stay competitive, improve performance, and achieve long-term sustainable growth. While the group faces significant challenges in the short-term as we reset and reshape the food business as part of the multi-year transformation plan, the group’s other businesses and key associates are performing well and have strong market positions.”

Want to know more?

Asia subscribers can read more on Dairy Farm's Strategic Outlook here.


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