Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DFI Retail Group Holdings Ltd (DFIHY, Financial) reported an underlying profit of $76 million, showing significant growth compared to the previous year.
- The convenience stores segment posted double-digit operating profit growth, driven by a strong ready-to-eat proposition.
- The company achieved a 40% increase in operating profit, with margins improving to 3.8%, a 100 basis points improvement year-over-year.
- DFI Retail Group Holdings Ltd (DFIHY) reduced its net debt by $330 million, ending at $549 million, demonstrating improved financial health.
- The company is seeing strong growth in its e-commerce segment, with a 40% increase in volume and a pivot to a sustainable model that supports profitability.
Negative Points
- Overall subsidiary sales were down 2% when excluding the impact of the Malaysia food divestment.
- The company faced a decline in cigarette sales due to an unplanned change in cigarette taxes by the Hong Kong government.
- Home furnishings sales decreased by 13% due to weaker consumer confidence and a downturn in the property market.
- Maxim's sales were impacted by increased outbound travel and reduced weekend dining out in Hong Kong.
- The retail environment remains challenging, with ongoing high interest rates and weak consumer confidence affecting performance.
Q & A Highlights
Q: What is the rationale behind the guidance range for the second half of 2024, and what factors could influence the low and high ends of this range?
A: Clem Constantine, CFO, explained that the guidance range of $180 million to $220 million reflects uncertainties in the second half, including sluggish sales performance and macroeconomic factors like high interest rates and outbound travel. The range accounts for potential variations in these factors, aiming to provide a realistic outlook given the current environment.
Q: Can you provide insights into the retail scene in Hong Kong for the third quarter, especially after the weather-affected second quarter?
A: Scott Price, CEO, noted that while it's early to project the entire half based on one month, the second half will likely see similar trends to the first half. Consumer confidence remains cautious, with a focus on value. The ongoing impact of cigarette tax changes and the divestment of the Malaysia business will also influence revenue.
Q: How does DFI Retail Group plan to achieve profitability in its retail media initiatives, and is this included in the 2024 guidance?
A: Scott Price, CEO, stated that retail media is in its early stages and not yet material to forecasts. The strategy involves leveraging the YUU platform and in-store media opportunities. While included in the guidance, significant profitability from retail media is expected in the longer term, potentially becoming more substantial by 2025.
Q: What are the expectations for digital spending and cost savings in the digital segment for the rest of the year?
A: Scott Price, CEO, explained that the focus is on reducing the cost per transaction in digital operations. The strategy involves optimizing scale and leveraging data and media monetization to ensure e-commerce growth is neutral or slightly accretive to brick-and-mortar margins. This approach aims to improve profitability while maintaining transaction growth.
Q: Could you provide an update on the growth and strategic focus of Maxim's and Yonghui, your key associates?
A: Scott Price, CEO, highlighted that Maxim's is focusing on growth in Southeast Asia due to softer performance in North Asia. For Yonghui, despite challenges in the Chinese market, there is confidence in its transformation plans and potential to become a valuable part of DFI's portfolio, supported by strategic partnerships and repositioning efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
