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Dairy Farm’s Giant ambition

Hong Kong based retail giant Dairy Farm says it is experiencing growth in every Asian market in which it operates.

The listed retailer now boasts 5406 retail stores across Asia, ranging from Ikea partnerships in Taiwan to supermarkets in Hong Kong and a new pharmacy operation in Vietnam. It also has a 50 per cent stake in Hong Kong’s Maxim restaurant group.

Undeterred by the unsettled global economic environment it is continuing to seek investment opportunities in both current and new markets in the region.

“While the global economic outlook remains uncertain, Dairy Farm’s market leading businesses are generally trading well,” said chairman Simon Keswick, releasing the company’s latest results this month. “With its strong financial position, the group is well placed to secure further development opportunities.”

Underlying the commitment to seeking new opportunities, Dairy Farm earlier this year took a 70 per cent stake in a Cambodian supermarket chain, a partnership in which Dairy Farm will bring regional operational expertise to a sound local retailer taking advantage of a fast growing southeast Asian economy.

“This joint venture with the local partner offers good opportunities for growth,” said group CEO Michael Kok.

Prior to kits Cambodian entry, Dairy Farm’s most recent expansion has been in Vietnam where it opened its first hypermarket, a Giant-branded store in the new Crescent Mall complex in Ho Chi Minh City’s expatriate hub, District 7.

It also opened the first five Guardian-branded health and beauty stores in a nation where there are few branded or chain affiliated pharmacy retailers.

“We continue to pursue suitable sites for the expansion of our multi-format operations,” said Kok.

In Malaysia, Dairy Farm opened seven new Giant hypermarkets last year, taking the total to 71 stores. Six more are scheduled in 2012.

In Macau, Dairy Farm operates 7-Eleven and Mannings Pharmacy businesses, both of which improved their sales and earnings in the last year.

In mainland China, 7-Eleven Southern China’s focus on growing its ready-to-eat food business led to improved sales and margins and Mannings achieved a further increase in sales as it continues to pursue its development plan. Maxim’s opened its first Chinese restaurants in Shanghai and Guangzhou, and added three Genki Sushi outlets in Shenzhen and Guangzhou. It increased its market penetration in Southern China with the number of its cake shops now standing at 100 stores.

In Hong Kong, Dairy Farm reported profit growth in all banners. Wellcome supermarkets achieved a good result, especially in the second half of the year, and the 7-Eleven convenience stores recorded higher sales and profit in a challenging market segment.

Ikea had “another fine year,” said Kok, as the MegaBox store at Kowloon Bay continued the good trading results achieved since its opening in June 2010. Maxim’s performed well in 2011 as the negative effects of increases in food costs and the introduction of a statutory minimum wage in Hong Kong were mitigated by strong sales growth. Its Starbucks business and the Japanese restaurant chains produced “excellent results”.

In Indonesia, Dairy Farm passed the 500-store milestone in the country and seven sites have been selected for new hypermarkets later this year.

In India, Dairy Farm’s Foodworld supermarkets continued to make progress as higher turnover and reduced operating costs led to lower losses. New stores were opened in 2011 with encouraging results. Health and Glow achieved increases in both sales and profit from its health and beauty stores, and its growth momentum “bodes well for the future,” said Kok.

And in Singapore, Dairy Farm’s Cold Storage-bannered supermarkets performed well in 2011 and achieved higher sales and profit.

“Shop N Save faced challenges with keen competition, although sales improved in the latte part of the year following the remodelling of its stores. The Giant hypermarkets made progress with increased sales and profit, said Kok.

The Singapore 7-Eleven operation performed “satisfactorily” and ended the year with 561 stores, while Guardian achieved good growth in both sales and profit in a competitive segment.

In Taiwan Dairy Farm secured a site in Tai Chung for a fifth Ikea store, and the project is progressing well for completion in 2013.

“In mainland China, we continued to expand our Mannings health and beauty business, which now has 195 outlets.”

Kok predicts the company will experience an even better year this year as it continues to grow its retailing formats in existing markets and seeks acquisition opportunities.

“Substantial capital has also been earmarked for the expansion of our hypermarkets and supermarkets in Indonesia and Malaysia, as well as for the refurbishment of existing stores. Overall, our net growth in the number of stores for this year is expected to be higher than in 2011.”

Overall, sales, including 100 per cent of associates, increased by 15 per cent to US$10.4 billion in 2011, while underlying profit at US$474 million was up 16 per cent. Foreign currency movements enhanced both sales and profit by four per cent during the year.

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