DFI Retail Group Q3 underlying profit up 17%; full-year guidance raised

[SINGAPORE] DFI Retail Group posted a 17 per cent year-on-year increase in underlying subsidiary profit from continuing operations for the third quarter ended Sep 30, 2026, the company announced on Friday (Oct 23).

This figure excludes restaurant associate Maxim’s and was mainly attributed to higher profitability in its health and beauty segment and home-furnishings segment, and lower administrative expenses from ongoing lean initiatives, DFI said in an interim management statement.

While the company did not disclose the exact figures, analysts from CGS International (CGSI) said in a Friday note that they estimate the underlying profit excluding Maxim’s was about US$73 million in Q3, or about US$174 million for its nine months, forming 76 per cent of CGSI’s FY26 forecast.

On the back of the performance, DFI raised its full-year underlying profit guidance to between US$295 million and US$305 million, with the lower end of the range up from the US$285 million previously guided.

The mid-point of US$300 million sits roughly 2 per cent above consensus projections.

The group also committed to lifting its dividend payout ratio from 70 per cent in FY2026 to 80 per cent in FY2027.

Stable segmental margins

For the quarter, underlying sales from continuing operations – excluding the Singapore food business and Mannings China – rose 4 per cent year on year, or 2 per cent on a like-for-like (LFL) basis.

Top-line momentum was anchored by the health and beauty division, where sales advanced 7 per cent (5 per cent LFL) across both Mannings and Guardian. The segment’s divisional profit expanded 12 per cent on the year as margins improved by 40 basis points.

Guardian’s performance was led by sales growth in Indonesia (above 20 per cent LFL) and Vietnam (9 per cent LFL), and was partially offset by a highly competitive market environment in Malaysia.

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The convenience store division saw sales climb 5 per cent year on year, driven by continued growth in higher-margin categories, particularly ready-to-eat and collectibles.

“In Singapore, LFL sales growth accelerated to 11 per cent with increased customer traffic and continued expansion of differentiated non-food categories, including Pokemon trading cards,” DFI said.

However, segment profit slipped 2 per cent due to upfront customer acquisition investments.

In the food division, sales were flat year on year as a high comparison base from pre-typhoon pantry-stocking in September 2025 muted headline numbers, though divisional profit edged up 4 per cent thanks to improved sourcing efficiencies and cost controls.

Meanwhile, home-furnishings profit jumped 17 per cent year on year, and LFL sales growth was at 4 per cent, partially lifted by stronger home-furnishings demand amid the continued recovery in property market transactions in Hong Kong.

As for Maxim’s, the group’s 50 per cent-owned restaurant associate, it delivered a 14 per cent increase in underlying profit and 6 per cent growth in revenue year on year, on earlier Mid-Autumn Festival demand and strong performance in its Japanese chain restaurants. This was partially offset by weaker sales in Chinese restaurants and quick-service restaurants.

Analysts remain positive

Research houses reacted positively to the interim update, pointing to solid margin execution and the impending reorganisation of its Maxim’s and Starbucks assets.

During the quarter, the group announced that it would assume Maxim’s existing interests in the Starbucks licensed business, in addition to receiving a cash consideration of about US$340 million.

The transaction is part of a broader reorganisation of the 40-year joint venture between DFI and Hongkong Caterers.

As part of the deal, Maxim’s will also buy back the 50 per cent indirect stake that DFI currently holds in the joint venture.

DBS Group Research reiterated its “buy” call on the stock with an unchanged target price of US$4.50.

DBS analyst Chee Zheng Feng noted that early corporate actions have established a firm base.

“With the Maxim’s deal falling into place, the early value unlock from disposals is largely behind us and the harder part of operational execution comes next. This set of results reinforces our confidence in management’s execution capabilities, evident from the upgrade to FY26 earnings guidance and reassurance on segmental margins,” he said.

Chee added that stable segmental margin outlooks for health, beauty, and convenience stores alleviate major overhangs, though the next inflection point lies ahead.

“For a more meaningful rerating, we believe the market will need evidence that DFI can successfully turn around Starbucks, with early signs potentially emerging from the second half of 2027. Given management’s execution track record to date, we are increasingly confident in its ability to transform Starbucks into a new pillar of growth for DFI.”

CGSI maintained an “add” recommendation on DFI with a target price of US$5.50, benchmarking the counter at 22.5 times FY2028 price-to-earnings.

CGSI analysts Meghana Kande and Lim Siew Khee highlighted that underlying trading remains fundamentally intact despite market volatility.

“We believe DFI’s year-to-date share-price weakness reflects broader market flows away from consumer discretionary names amid an elevated cost environment, rather than company-specific issues. We also believe the market has largely absorbed the expected 2027 forward earnings dilution from divesting its stake in Maxim’s while acquiring Starbucks,” the analysts said.