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Tencent has partnered ParknShop and Yonghui to launch a new grocery chain ParknShop Yonghui. Valued at US$170m, the joint venture aims to help both Yonghui and ParknShop expand their businesses in China further.
Yonghui has achieved total revenue of CNY34.3bn (US$5bn), an increase of 21.5% in the first half of 2018.
Yonghui continues to report robust results despite increasing challenges raised by online rivals. Network expansion and format development are major drivers of growth for the retailer, as it continues to expand its network across China.
Yonghui is mainly focusing on smaller-format stores, opening Yonghui Life convenience stores that operate approx. 100 sq m. However, the retailer has also been expanding its premium supermarket banner, Bravo YH, opening 52 new stores so far this year.
To boost offline and online integration, the retailer will look to make its Yonghui Life App available at all its stores. This will allow more shoppers to purchase online and have their purchases delivered in 30 minutes if they live within a 3km radius from a store.
Earlier in the year, Yonghui announced plans to open 135 Bravo stores, 100 Super Species and 1,000 Yonghui Life stores throughout 2018.
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Dairy Farm has reported a strong set of results for the six months ended 30 June, with consolidated sales up 6%.
Total sales, including associates and joint ventures, were up 17% to US$12.2bn. This was mainly driven by increased sales from Yonghui supermarket in China. Dairy Farm sales increased 8% to US$5.9bn or up 6% at constant rates of exchange, and underlying net profit increased 2% to US$225m.
For the Food businesses, the Group reported lower sales and profits in Singapore, Malaysia and Indonesia. In the Philippines, sales were higher but profits lower.
The retailer has already been closing underperforming stores to improve profitability in Southeast Asia, but it recognises that it will take time for its operations to turnaround following the strategic review it conducted last year.
In North Asia, overall sales within the Food businesses were ahead for the same period last year, but profits declined mainly due to higher rental and labour costs in Hong Kong. Supermarket chain Yonghui reported strong sales growth, as it continues to open new stores in China.
The performance of Dairy Farm’s 7-Eleven operations traded in line with last year in Hong Kong and Macau. LFL sales increases and store expansion in Mainland China continued to support growth.
In Singapore, overall sales were slightly lower than last year after ending the partnership with Shell Singapore. However, profitability improved following the closure of some underperforming stores.
The Health and Beauty business in Hong Kong and Macau delivered very strong sales and profit growth. This was driven by a significant increase in the number of mainland Chinese tourists. In Malaysia, Indonesia and Vietnam, the retailer reported better underlying results.
In March, Dairy Farm agreed a deal to exchange Rustan’s for 18.25% stake in Robinsons in the Philippines. The deal is subject to regulatory approvals but is expected to be completed in the fourth quarter.
There were also some leadship changes during the first half. Dr George Koo stepped down as a Director on 9th May 2018, and the retailer has brought in several new senior executives with a wealth of retail experience, e.g. Simon McDowell, Group Chief Customer Officer and CEO North Asia Health & Beauty.
At the end of June, the Dairy Farm group had more than 7,400 outlets across all formats, compared with 7,181 at the end of last year.
Chairman Ben Keswick has outlined five strategic priorities:
Subscribers can read more on Dairy Farm Strategic Outlook here.
Dairy Farm has reported a disappointing set of annual results, mainly attributed to the performance of its supermarkets and hypermarkets in South-east Asia.
Sales was up 1% YoY to US$11.3bn while consolidated sales including joint ventures and associates increased 7% to US$21.8bn, reflecting strong sales growth of 17% to US$ 8.6bn at Yonghui. However, net profit fell to US$403.5m for the 12 months ending December 31st, down from US$469m the year before. The retailer added a net 633 stores during the year.
Sales from supermarkets and hypermarkets (excluding Yonghui) declined -3.2% to US$6bn from previous year in constant currency. Operating profit plummeted -30.4% to US$135m. Large formats sales in Malaysia, Singapore and Indonesia continued to struggle, with a network of unprofitable stores closed in the fourth quarter, compounded by a major clearance of excess old stock. Performance in Hong Kong showed greater resilience, and Rustans in the Phillipines became a wholly-owned subsidiary following the acquisition of the remaining 34% equity.
Its 7-Eleven convenience stores reported sales of US$2bn, up 4% from previous year in constant currency terms. Operating profit increased by 16% to US$85m. The convenience format reported like-for-like growth in Hong Kong, South China and Singapore, driven by click and collect ecommerce services, a general consumer trend towards convenience, stronger collaboration with SEJ and encouraging growth in Guangdong.
Similar to 2016, the Health and Beauty division performed strongly, with sales increasing 7% to US$2.6bn and operating profit rising 20% to US$210m. Strong performances in Hong Kong Macau, Indonesia and Vietnam, plus improvements in Mainland China. Singapore and Malaysia were noted to have struggled during 2017.
Home Furnishings (Ikea in HK, Taiwan and Indonesia) again achieved record sales and operating profit during 2017. In constant currency terms, operating profit rose by 8.5% to US$77m and restaurants business reported US$2.2bn in total sales, an increase of 11%.
Dairy Farm will look to deepen its ecommerce presence across home furnishings, food, and health and beauty operations. Maintaining strength in Hong Kong will continue to be important, as will be growth in China. A strategic review to recapture stronger financial performance and profitability is underway. In Singapore, for example, Cold Storage has undergone a detailed range review and recently launched a new format.
In its health and beauty banners, Guardian and Mannings, the retailer will continue to develop its private label brands. Furhermore, the retailer is committed to expanding its c-store network further, as well as testing new smaller-store formats in some markets.
Group chief executive Ian McLeod said, 'In general, we have not responded fast enough to new competition and changing consumer preferences across many of our markets, and need to improve the shopping experience for our customers, as well as address gaps in our range and become more price competitive.'
Chinese tech giant Tencent Holding Ltd, rival of Alibaba Group, plans to buy a 5 per cent stake in Yonghui Superstores, making a push into bricks and mortar retail.
The investment will be made through Tencent affiliate Linzhi Tencent Technology, will see the firm take a minority 5% stake of Yonghui Superstores and a 15 percent stake in Yonghui’s supply chain and logistics subsidiary via a capital increase.
It is reported that Yonghui will introduce WeChat Pay, Tencent’s self-developed online payment method to its 500 stores in China. The superstore will then benefit from the customer traffic generated by WeChat users.
Tencent, the leading shareholder of JD.com is pushing into bricks and mortar. Just a month ago, its rival Alibaba expanded its investment in bricks and mortar retail by buying into Sun Art Retail Group, one of China’s major grocery chains, and a key competitor of Yonghui.
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