Tao Heung sets sights on local diners despite weak consumption sentiment

PUBLISHED : Thursday, 06 September, 2012, 12:00am
UPDATED : Thursday, 06 September, 2012, 3:12am

Hong Kong's retail and catering sectors may have long relied on mainland tourists for growth, but homegrown consumers remain Tao Heung's bread and butter.

Most of the chain's 3.5 million diners a month are Hongkongers, despite weak local consumption being blamed for slow retail sales growth, which plunged to a three-year low in July.

Tao Heung, which operates 115 restaurants and bakery outlets in Hong Kong and 21 restaurants on the mainland, said it would launch more promotions targeted at local consumers rather than mainland tourists in the upcoming Golden Week.

"Mainland travellers do not make up a big portion of our business, except in tourist areas," group chief executive Eric Leung said. "The bulk of our business comes from locals, and despite overall weakening consumption sentiment in July and August, we saw growth in our sales as we foresaw that and launched several timely promotions."

The chain, famous for its HK$1 offer for a whole chicken, sold 15,000 chickens a day in June - more than double last year's 7,000 a day.

The group's first-half net profit jumped 10.8 per cent year on year. It expects same-store sales growth in the second half to exceed the 2 per cent in the first half.

"Diners are particularly price-sensitive when the economy is bad," Leung said. "I expect the economy to remain weak in the next few months."

While Tao Heung, like many of its rivals, intends to speed up the opening of its restaurants on the mainland, Leung said it would keep the ratio of mainland to Hong Kong outlets in balance to hedge risks.

The budding mainland business remains a liability to the company, as the nine new outlets it will open this year should report heavy depreciation in the next two years.

This, together with plans to open an average of nine mainland outlets every year, means dividend payout levels will remain under pressure in the next two to three years.