Circle K's parent reports 6.9pc drop in net profit on higher operating costs

PUBLISHED : Friday, 28 February, 2014, 1:10am
UPDATED : Friday, 28 February, 2014, 5:09am

Convenience Retail Asia, which operates the Circle K chain of convenience stores and Saint Honore bakery shops, is predicting 5 per cent same stores sales growth in Hong Kong and 10 per cent growth on the mainland this year, despite rising costs and a slow first two months.

"If you're not in a business that caters to mainland tourists, it is hard to keep up with these rising operating costs," chief executive Richard Yeung Lap-bun said at the firm's annual results briefing yesterday.

"It's not too easy to pass on the costs to the customer."

He said the firm had experienced significant rent increases in Hong Kong and had also struggled with a talent shortage.

Yeung revealed that sales for the first two months of the year showed growth in the low single digits, following a cold snap. "The weather was very cold," he said. "When the temperatures drop, Circle K tends to see less sales of drinks and ice cream products."

Group financial director Sam Hui Chi-ho said the second and third quarter, during the summer, was its peak season.

CRA announced a 6.9 per cent drop in net profit to HK$150 million for the year ended December. Convenience store sales increased 4.6 per cent in Hong Kong, helped by an increase in same-day visitors from the mainland, and were up 13.3 per cent on the mainland.

Management was upbeat about the firm's six-month-old online shopping platform, which sells various lifestyle products including skincare, housewares, stationery and food, providing customers with several ways to combine the online and offline shopping experience.

"It's not just the traditional e-commerce model of ordering online and delivering to your home," Yeung said. "You can reserve online and pick it up in stores. If you see [at the store] it's not what you want, you don't have to buy it."

Yeung added that picking up the purchase was convenient because Circle K stores are open 24 hours, meaning customers don't have to wait at home for delivery. "Eight out of 10 people who buy something online and pick up in stores end up also buying something from the [physical] store."

The firm's share price rose 1.10 per cent to HK$5.51 yesterday as the Hang Seng Index gained 1.74 per cent.


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