Dairy Farm reports COVID-19 impact on its Q1 2021 operations

Date : 14 May 2021

Francis Ramos

Senior Retail Analyst

Dairy Farm International has reported that its sales in the first quarter of 2021 continue to be significantly affected by the pandemic. 

Shopper behaviour has now normalised, affecting comparison with sales performance in 2020

Since spending patterns of consumers have now normalised compared with the high sales base in the first quarter of 2020, like-for-like sales of Dairy Farm’s grocery retail business is lower compared to the same period last year.  The Group expects continued pressure on comparing sales and profitability year-on-year due to:

  • This year’s normalisation of shopping behaviour in grocery retail
  • Reduced levels of government support
  • Uncertainty on the relaxation of travel restrictions

Mixed performance across the various channels

  • Large store formats: sales performance in Indonesia continues to be the most severely impacted by the pandemic, given the country’s ongoing movement restrictions that has consequently reduced store traffic
  • Convenience: improvement in like-for-like sales performance, driven by the strong growth in South China in the first quarter of 2021, compared with the tight lockdown restrictions as the pandemic started in the first quarter of last year
  • Health and beauty: remains to be negatively impacted by the pandemic.  In North Asia, the continued absence of tourists in Hong Kong due to border closures has the most adverse effect in the region.  Sales in Southeast Asia is also affected by the reduced footfall in the malls where many Guardian stores are located
  • Home furnishings: like-for-like sales is similar with last year, but the opening of new stores and strong growth of its ecommerce business has led to overall sales growth
  • Maxim’s: sales has improved in the first quarter of 2021, compared with the same period last year.  But government restrictions on opening hours and restaurant capacity continue to pose a challenge to sustainable growth
  • Joint ventures: Yonghui’s performance in the first quarter this year has been impacted by a high sales base from the previous year, and reduced gross profit margins due to pressure from competition.  Robinsons Retail’s performance in the Philippines is also influenced by continued movement restrictions, and its supermarket sales is also negatively affected by a high base in the first quarter of 2020  

Positive outlook with Dairy Farm’s business transformation initiatives

The Group maintains a positive outlook given its progress on its business transformation, which has led to underlying profitability in the first quarter of 2021 significantly better than what it has achieved in the more comparable first quarter of 2019.  It remains confident that these initiatives will deliver sustainable enhancements to the business over time, offset some of the adverse effects brought by the pandemic, and drive medium to long-term growth.  In Q1 2021, the Group’s business transformation include the following achievements:

  • The relaunch of the Giant brand in Malaysia: has been executed in over 50 stores in the first quarter, as well as the addition of over 2,000 new items in these stores
  • The third IKEA store has opened in Indonesia
  • Yuu Rewards programme in Hong Kong continues to grow and has now around 3.3 million members, with over 60 billion points issued.   32 Maxim’s brands have also been added to the programme

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