Convenience Retail Asia FY19 results: revenue up 5.9%

Charles Chan
Senior Retail Analyst
@RetailAnalysis

Date : 10 March 2020

Despite challenging trading conditions, Hong Kong-based Convenience Retail Asia (CRA) has posted a robust set of annual results, with Group revenue increasing by 5.9% to HKD5,632m (US$724.8m).

Revenue and profits up despite tough trading conditions

Overall increase in revenue was mainly attributed to a 6.1% growth in comparable-store sales for the convenience store business (turnover increased 7.5% to HK$4,524m) and higher revenue at Zoff.  The Group’s core operating profit grew 19.3% to HKD256m and net profit up 13.3% to HKD208m. This was achieved despite highly volatile social and market sentiment.

Hong Kong’s trading conditions have been challenging. General macroeconomic uncertainties remain, e.g. trade dispute between China and the U.S, and social unrest in Hong Kong since the second half of 2019. For the latter, daily necessities and consumables were somewhat less affected, relative to other categories, e.g. drugstores, jewellery, etc.

Relevance and reinvention key to growth

Convenience Retail Asia is committed to delivering its '4P’s Plus' strategy to offer a more relevant customer experience. This revolves around product, promotion, place and pricing in relation to the customer buying process + O2O business model. This joins up CRA’s loyalty programs to drive traffic into stores.

During 2019, CRA's O2O customer relationship management programs continued to play important role in the retailer's marketing strategy. Circle K’s ‘OK Stamp It’ and Saint Honore’s ‘Cake Easy’ programs reached 1.5m and 630,000 members, respectively.

Store network relatively stable

At the end of the reported period (31 December 2019), the retailer operated a total store network of 518 outlets. This is down from 580 stores at the end of 2018, but mainly due to Suning acquiring 61 Circle K stores in Guangzhou in August 2019. The retailer’s other operations have remained relatively stable.

  • 518 total store network
  • 336 Circle K stores in Hong Kong (opened 13 new stores and closed 14 during the year)
  • Total of 47 franchised Circle K stores in Macau (33) and Zhuhai (14)
  • Total of 126 Saint Honore Cake Shops in Hong Kong (90), Macau (9) and Guangzhou (27)
  • 9 Zoff eyewear stores in Hong Kong (opened tenth store on 8th January 2020)

Outlook will remain challenging

The retailer has cited, as long as the Coronavirus (COVID-19) persists, there will be continued economic contraction, weakened consumer sentiment, and reduced retail and tourist traffic – all with potential impact on the Group’s business performance for the first half of 2020.

Social unrest plus the coronavirus have dealt a double blow for the retail industry in Hong Kong. It will take longer for tourist and visitors to return to the market, but rental and labour cost increases will trend down. Nonetheless, CRA has taken quick actions to strictly control expenses and expenditures, drive efficiencies and adjust promotions and product category.

Richard Yeung, CRA’s Chief Executive Officer, said, “In facing many challenges, including the coronavirus disease, we remain resolute in our mission to serve customers from all walks of life and to help make their lives easier. We will do our best to maintain normal operations and to be a source of positivity for the people of Hong Kong.”

Want to see what Circle K is doing in-store?

Subscribers can read Retail execution at Circle K in Hong Kong here.