High rents dent convenience chain earnings
Higher rental and labor costs have led to a drop in profits for Convenience Retail Asia.
The operator of Circle K convenience stores and Saint Honore cake shops saw its net profit for the first half decrease 7.7 per cent to HK$60.1 million (US$7.7 million) due to escalating store operating expenses.
In Hong Kong, retail rentals levelled out but remained high, while labour expenses continued to rise on the back of low 3.3 per cent unemployment, strong labour demand in the retail sector and an increase in the minimum wage.
Circle K and Saint Honore generated slight comparable store sales growth of 6.2 per cent and 3.9 per cent, respectively.
Convenience Retail Asia is cautious about the second half of the year as decelerating economic growth and dampened consumer sentiment in mainland China are expected to continue.
“We expect a difficult operating environment heading into the second half of the year,” said CEO Richard Yeung.
The company is hoping that its online platform, FingerShopping.com, will help it capitalise on the growing trend for multi-channel shopping and expand the scope of its convenience services.
A member of Fung Retailing, Convenience Retail Asia currently has 594 stores, a network expected to increase to between 610 and 620 by the end of the year.