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CK Hutchison has flat year in retail

Hong Kong conglomerate CK Hutchison’s retail division reports flat revenue for last year.

At December 31 it had more than 13,300 stores across 25 markets. This included 931 new stores, an 8 per cent increase on 2015.

Total reported revenue of HK$15.15 billion (US$1.95 billion) was flat, while pre-tax profit of HK$12.05 billion was 2 per cent lower because of adverse foreign currency translations. In local currencies, revenue and profit increased by 3 per cent, reflecting strong growth in most businesses, partly offset by poor performance in Hong Kong.

While maintaining stable market share, Hong Kong was hit by cost inflation and lower tourist arrivals. Fortress, the group’s consumer electronics and electrical appliance retail arm in Hong Kong, was also adversely impacted by significantly lower sales of mobile handsets.

Pre-tax earnings of the Hong Kong retail business declined 68 per cent, while increasing 8 per cent for the rest of the division in local currencies.

With Hong Kong business now representing only about 2 per cent of the retail division’s pre-tax profit, its impact on the division’s performance will be less significant going forward.
Despite negative comparable-store sales growth of 4 per cent for the year, organic expansion of
stores continued in Asia with a 14 per cent increase in store numbers.

While most health-and-beauty outlets in Asia had encouraging growth rates, the China subdivision, the largest profit contributor, was hit by a 5 per cent RMB depreciation. The management team has implemented strategic programs focussed on revitalising mature stores through renovation, store segmentation and cost-control measures, with initial results proving positive.

Strategically, the retail division plans to open more than 1000 stores this year, 65 per cent of them under the health-and-beauty format, in Mainland China and Asia. The division will continue to promote its own brand products, enhancing customer relationship management activities, and developing big data and e-commerce capabilities.

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