Restaurant operator Cafe de Coral Holdings is eyeing expansion opportunities in the Greater Bay Area to increase its Mainland China footprint.
The Hong Kong-listed company has reported a 16.2 per cent increase in profit attributable to shareholders of HK$239.1 million (US$30.57 million) in the first half year on a more modest 1.7 per cent increase in sales to $4.199 billion.
Chairman Sunny Lo Hoi Kwong said in a stock exchange filing that as at the end of September the group had 355 stores in Hong Kong and 98 on the mainland after opening seven new outlets during the first half year.
Those included two high-profile locations at the Shenzhen and Guangzhou airports. Another 10 outlets are scheduled to open before the end of the financial year.
“The group has identified a significant number of potential outlet locations throughout the Greater Bay Area, and we plan to aggressively grow our branch network over the coming two years to further solidify our presence in the Mainland China market,” said Lo.
“Although retail space became more readily available in Hong Kong, competition and rental rates for prime locations have remained high. Despite this challenge, the group continues to proactively expand our branch network, subject to the availability of attractive locations. We are fine-tuning our store network and actively negotiating with landlords for premium retail locations in Hong Kong.”
He said the improved profit showed that investments in internal improvements are bearing fruit.
“Revenue performance was stable whilst we focused on solidifying fundamentals and rationalising our branch network. During the reporting period, the dining-out market continued to grow – although customers are becoming more selective and price-sensitive in their dining habits. At the same time, labour shortages and a record low unemployment rate are proving to be challenging for staff recruitment.
However, the group remains confident in its ability to maintain growth through good times and bad, as it has proven over the past 50 years.”
The biggest improvement was in the casual dining business, whose performance upgraded substantially after rationalising its brand and restaurant portfolio and addressing fundamentals. That, supported by a commitment to quality ingredients and seasonal promotions have improved the business’ contribution to the group’s overall results, said Lo.
Within its divisions, Cafe de Coral achieved same-store sales growth of 2 per cent and Super Super Congee and Noodles, 1 per cent.
The group’s casual-dining business improved its performance “substantially”, achieving revenue of $461.9 million during the six months, up 9.5 per cent year on year, despite a reduction of five stores to 63.
Lo said the company was now looking for new sites to expand its branch network.
Within that division, its leading brand The Spaghetti House delivered “strong performance” thanks to menu reengineering, seasonal promotions and “Star Chefs” collaborations. Oliver’s Super Sandwiches achieved positive growth and business momentum through reinforced branding, seasonal promotions and an emphasis on quality ingredients. Both brands engaged customers through popular VIP programs.
The group’s homegrown casual-dining brand, Shanghai Lao Lao, continued to grow sales from its 13 outlets, along with Mixian Sense which has 16 shops. Lo said the latter chain aims to become a leader in the mixian (rice noodle) market. Measures such as enhancing its food quality and ingredients and applying advanced technology – such as QR code ordering – have been warmly received by customers.
Meanwhile, the group continues to fine-tune the business models of its franchised brands, The Cup and Don Don Tei, exploring potential for scalability.
Mainland China sales rose 7.7 per cent to $590.7 million during the first half, however same-store sales growth remained flat during the period. The group plans to continue to focus on improving its dining-in experience after moves to enhance food quality have already pleased consumers.