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Dairy Farm sales rise in four business divisions

Dairy Farm International has reported like-for-like sales growth in four of its five operating divisions in the first quarter, despite what it described as “mixed market conditions”.

In an interim management statement, the Hong Kong-headquartered pan-Asian retail company said underlying earnings were also higher than the first quarter of last year, following the adoption of the new lease-accounting standard.

“There was a strong performance from the health-and-beauty business as well as from key associates Maxim’s, Yonghui and Robinsons Retail, which offset the continuing softness in the food business,” the statement said.

“Ikea continued to perform in line with expectations, although its contribution to the group was impacted by higher pre-opening costs than in the first quarter of last year.”

Although the group’s supermarkets and hypermarkets business continued to face challenges, implementation of the multi-year transformation plan is now in progress, with actions being taken to improve performance over the medium term. Sales in North Asia were broadly in line with last year, with positive sales growth in Hong Kong and Macau offset by weakness in Taiwan. Profit performance in the quarter was impacted by rising rent and labour costs in Hong Kong.

Dairy Farm CEO Ian McLeod has previously estimated it will take the company five years to complete is turnaround plan, focused largely on resuscitating a food business which has failed to keep pace with changing consumer shopping behaviour.

Sales in Southeast Asia in the first quarter were impacted by the launch of a store consolidation plan in the region, with profits also lower. The plan is designed to improve space productivity and underlying profitability over time. The company said its convenience-store business achieved higher sales in all markets, but with slower profit growth as a result of additional costs incurred in support of a stronger store network expansion.

“Sales and profits growth continued for the health-and-beauty business in North Asia, with total tourist traffic remaining strong. Southeast Asia also delivered a solid performance with encouraging sales and profit growth in the quarter, particularly in Malaysia and Indonesia.

“The home furnishings business reported higher sales in all markets, but profitability was lower primarily due to the increased cost of goods compared with last year and the pre-opening expenses incurred for new stores under development.”

The Maxim’s and Yonghui businesses both delivered strong sales growth for the period and their contributions to the group’s profit were ahead of the comparable period last year, the company said. The group’s results also benefited from its share of results from the 20 per cent interest in Robinsons Retail it acquired in November last year.

“Dairy Farm remains firmly focused on its multi-year strategic transformation to deliver sustainable improvements to the business,” the company said.

Dairy Farm operates more than 9700 outlets on its own or with partners – including supermarkets, hypermarkets, convenience stores, health and beauty stores, home furnishings stores and restaurants – employing more than 230,000 people. Its banners include 7-Eleven (in Hong Kong and Singapore), Starbucks (Hong Kong, Singapore, Vietnam and Cambodia), Giant (Malaysia and Singapore), Wellcome supermarkets (Hong Kong) and Guardian.

Total sales last year exceeded US$21 billion.

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