DFI Retail Group

Food – Grocery Retail

Given the significant volatility in 2020 performance, a comparison of performance in 2021 to 2019 provides a better understanding of the progress made in the group’s transformation plan. Operating profit for the Grocery Retail division in 2021 was US$143 million, significantly higher than the US$63 million reported in 2019. This reflected a strong improvement in underlying profitability achieved through the execution of business improvement programmes, business portfolio management initiatives, store revitalisation programmes leading to improved store-level execution, enhanced own brand penetration and progress in driving customer loyalty in Hong Kong.

The weaker performance in Grocery Retail in 2021 compared with 2020 was due to reduced sales as customer buying behaviours normalised compared with last year, together with lower levels of government support.

Food – Convenience

The performance of the group’s Convenience business was broadly flat compared with the prior year. It received lower levels of government support than the prior year, but saw better performance in Hong Kong and Macau, where 7-Eleven sales recovered in the third quarter as market conditions stabilised. There was strong new store growth and reinvigorated customer traffic into stores, particularly in Hong Kong. Operating profit was 5% lower than the prior year, however, primarily due to lower profits in Singapore and the Chinese mainland, where COVID-19 restrictions impeded sales momentum.

Health and Beauty

Total underlying sales (excluding the impact of divestments) for the Health and Beauty Division were slightly lower than the prior year. The absence of tourist traffic due to the ongoing closure of the border with the Chinese mainland continued to significantly impact Mannings’ performance in Hong Kong, which was also impacted by lower levels of government support than the prior year, while Guardian performance in Singapore and rest of Southeast Asia was impacted by fewer customer visits due to pandemic restrictions. Operating profit for 2021 was lower than the prior year, but profitability increased by over 50% in the second half as a result of improved sales and strong cost control.

Home Furnishings

Home Furnishings reported solid performance despite the negative impact of government-imposed trading restrictions and global supply chain disruptions. Sales benefitted from ongoing store network expansion and strong e-commerce growth, but profits were 36% lower. This was principally due to ongoing pandemic-related restrictions and compromised range availability caused by global supply chain constraints, which impacted like-for-like sales performance, as well as some additional pre-opening expenses.

Associates

The group’s overall reported financial results in 2021 were materially affected by its US$90 million share of the loss incurred by Yonghui. Yonghui’s performance was impacted by a combination of the normalisation of sales performance; reduced margins resulting from rising competition and investments in digital.

The contribution from 50%-owned Maxim’s increased significantly in 2021 to US$52 million, as restaurant patronage recovered, particularly in Hong Kong and on the Chinese mainland.

Other Developments

Following a detailed strategic review of PT Hero, DFI Retail’s 89.3%-owned subsidiary in Indonesia, was restructured in the year and pivoted focus towards its strong brands of IKEA, Guardian and Hero Supermarkets, and away from the Giant banner. The Giant banner in Indonesia ceased operations in July, with six stores subsequently converted to the upscale Hero banner, the conversion of one store in Bali into an IKEA store in the fourth quarter and a number of other sites also scheduled to be transformed into IKEA stores.

‘Own brand’ has continued to be a key driver of value for customers and Meadows is now the number one brand across the whole group. Own brand development is also an ongoing focus within Health and Beauty, with plans to launch over 1,000 products during 2022.

Digital innovation and e-commerce remain a key focus for DFI Retail. The yuu rewards programme continues to exceed expectations and now has almost four million members, representing over 60% of Hong Kong’s adult population. All brands have benefitted from stronger levels of customer engagement. The yuu ecosystem has been expanded in 2021 to include Maxim’s as a partner, the introduction of yuu Insure and Shell as fuel partner, and the launch of yuu-to-me e-commerce functionality.