Dairy Farm: steady Q3 results

Date : 08 November 2019

Dairy Farm has posted an update on its trading performance for the third quarter, with growth in line with last year.

Steady third quarter overall, but weak consumer sentiment in Hong Kong

Dairy Farm said it performed "steadily" in the third quarter, with overall earnings in line with the comparable period the prior year. Performance across all channels, however, was impacted by difficult market conditions and weaker consumer sentiment affecting most of its consumer businesses in Hong Kong as a result of the ongoing social unrest.

Food business recovery still in early stages

Combined sales including 100% of those of associates and joint ventures for the period were ahead of the same period last year, mainly due to the investment in Robinsons Retail in the Philippines.  

Sales by the group’s subsidiaries in the quarter fell, as revenue from hypermarkets and supermarkets was impacted by the Southeast Asia store optimisation plan and the divestment of the Rustan Supercenters business.

In a press release, the retailer notes, “While the turnaround of the Southeast Asian businesses remains at an early stage, there are encouraging signs of improvement. The group continues to invest in and grow its capabilities in Southeast Asia in line with the multi-year transformation plan.”

Convenience sales ahead of last year

Dairy Farm’s convenience store sales in the third quarter were ahead of last year, but profitability was lower due to ongoing investment in new stores and overall pressures in rental and labour cost.

Health and beauty performance varied across the region

In health and beauty, Mannings’ sales and profits fell in Hong Kong, significantly impacting the overall performance of the segment. However, Guardian in Southeast Asia delivered an “encouraging performance,” with solid sales growth, particularly in Indonesia.

Home-furnishings posts solid results

The home-furnishings business (IKEA) reported robust sales growth for the quarter, with strong growth in Taiwan and Indonesia offset by lower performance in Hong Kong.

Joint ventures and associates: Yonghui strong, but Maxim’s struggle

Maxim’s performance during the third quarter was impacted by the ongoing social unrest in Hong Kong. Supermarket chain Yonghui reported strong underlying growth in profitability.  

PT Hero Supermarket Tbk: transformation ongoing

  • Net revenue fell 3.7% to IDR9,486bn (US$676.8m) for the third quarter, mainly due to the ongoing space optimisation plan to revitalise the Food business
  • Profit was IDR93bn (US$6.6m) lower than last year as a result of significant IKEA investment
  • Strong double-digit sales growth in Guardian and IKEA
  • Early signs of underlying profitability improvement in the retailer’s Food business
  • Multi-year transformation on track to improve performance in the longer term
  • PT Hero Supermarket Tbk and HappyFresh partnership covering HERO Supermarkets in Jakarta

Outlook for the rest of the year

Dairy Farm expects to see benefits from its transformation programme, but some of this will be “more than offset by weak trading conditions” in several of its Hong Kong businesses.  

...Simon Keswick stepping down from 1st January 2020

After serving the company for five decades, Simon Keswick will be retiring, stepping down from his position from the Board and as Managing Director with effect from 1st January 2020.