Dairy Farm hit by market challenges in Singapore

SINGAPORE - Dairy Farm International was hit by poor performance of its food division in a number of Southeast Asian markets, including Singapore where the retailing giant was pressured by weak consumer sentiments, labour crunch and rising costs.

Nonetheless, overall sales for the year ended Dec 31 improved by 5 per cent to US$13.1 billion (S$16.4 billion) with broad-based growth, partly offset by weaknesses in the food division, the company noted in its results announcement on March 5.

Net profit rose 2 per cent to US$509 million, said Dairy Farm, which is part of the Jardine stable of companies.

"Food reported US$8.4 billion in total sales, an increase of 2 per cent, while operating profit declined by 6 per cent to US$299 million, principally driven by poor results in Singapore, Indonesia and the Philippines within the supermarkets/hypermarkets formats."

Dairy Farm operates vast network of retail stores in Asia, including Cold Storage, Giant, 7-Eleven and Guardian in Singapore.

"In Singapore, fragile consumer confidence, challenges in the labour market and escalating costs adversely affected the overall performance," it noted.

"Cold Storage was broadly stable in the upscale segment, but Giant struggled against its mid-market competitors. 7-Eleven had positive like-for-like sales following its store rationalisation and range improvements."

Dairy Farm opened six new 7-Eleven stores while closing 50 others in Singapore last year, reflecting the challenging conditions that retail businesses currently face here due to manpower crunch and surging rental costs.

Pressured by the same constraints, Japanese fashion brand Lowrys Farm announced in January the closure of its eight outlets in Singapore, after barely three years in the local market.

But the Guardian franchise in Singapore performed better. Some 50 stores were renovated and a new e-commerce site was launched in the fourth quarter.

The group, which is listed in London with secondary listing in Singapore and Bermuda, saw strong sales in Greater China, where it also operates IKEA stores in Hong Kong and restaurants in the mainland.

Earnings per share grew by 4 per cent to 37.65 US cents.

The board is recommending an unchanged final dividend of 16.5 US cents per share.