DFI Retail reports ‘significant improvement’ in Q1 performance, but pre-Covid profitability still a way off
Sharon See
DFI Retail Group on Thursday (May 18) reported “significantly improved” year-on-year performance for the first quarter ended Mar 31, driven by the reopening of the Hong Kong border and the continued recovery in South-east Asia, the mainboard-listed company said on Thursday (May 18).
However, there remains “some way to go” before the business reaches the level of overall profitability achieved in 2019, DFI said in an interim management statement. It provided no figures.
The group’s subsidiaries reported a “modest increase” in operating profit during the period, the company added, also without furnishing figures.
The “strong recovery” in the health and beauty and convenience divisions was mostly offset by “lower results” in the grocery retail division, the company said, as consumer buying patterns normalised following exceptional performance in the first quarter of 2022 and as digital investments continued.
DFI’s North Asia grocery retail sales were lower than in the equivalent period last year, when demand was boosted by the fifth wave of Covid-19 in Hong Kong. Retail sales in South-east Asia were, in the meantime, crimped by cautious customer shopping behaviour from rising cost-of-living pressures.
Overall, grocery retail profitability in Q1 was lower than in the year-ago period, but still higher than Q1 2019.
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The convenience division reported “strong like-for-like sales growth” across all markets in Q1, including Hong Kong and China, DFI said. Overall profitability for the period “improved significantly” compared to Q1 last year, but was still below that in 2019.
DFI’s health and beauty division logged “substantial” sales and profit growth in Q1. In North Asia, Mannings in Hong Kong reported “double-digit like-for-like sales growth”, said the company, adding that “effective in-store execution led to a record market share” in the city.
Guardian in South-east Asia, particularly in Malaysia and Indonesia, also reported “strong sales growth” compared to last year.
“Overall profitability of the division more than doubled, leveraging sales recovery as well as ongoing promotional optimisation and robust cost control,” said DFI. It added that even if profitability remains below 2019 levels, “the early pace of recovery is encouraging”.
Sales revenue for home furnishings took a hit in Q1 and was “behind” that in the same period last year. “Sales were impacted by reduced demand for furniture, with border reopening likely driving short-term discretionary spending towards leisure activities, particularly in Hong Kong and Taiwan,” DFI said. “Profitability for the division has also fallen relative to the prior year due to these trading challenges, with the impact on profitability partially offset by robust cost control.”
It added that Ikea remains focused on delivering “increased accessibility through format innovation and new touchpoints”.
On the whole, DFI said it remains optimistic on the outlook for the rest of the year.
It noted that global headwinds remain, and that while inflationary pressures are easing, consumer confidence is uncertain.
“Recognising the sustained shift to online digital convenience, the group will continue its investment in digital platforms in order to compete,” DFI said.
DFI was formerly known as Dairy Farm International before its name change a year ago.
Its shares rose US$0.01, or 0.36 per cent, on Thursday to close at US$2.78 ahead of the update.
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