bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Jardine Matheson-controlled food retailer Dairy Farm has had another blow dealt its European interests, after intense competition caused profits to slump at its 29 per cent owned British food discount group Kwik Save.

Yesterday, interim profits were reported 28 per cent down to GBP44.2 million (about HK$514.05 million) much lower than analysts forecasts of GBP45 to GBP49 million.

 The results come shortly after continued losses at Simago, Dairy Farm's Spanish-based supermarket chain, were revealed. Simago had yet to make a profit since it was bought in 1990, and last year's trading results were hit by provisions, and a store refurbishment programme.

 Yesterday Kwik Save's shares dived 35 pence to 433 p, as the group warned its trading environment would become harsher, with gross margins coming under pressure.

 'The first half of this financial year has seen trading conditions Kwik Save has not experienced before,' Graeme Bowler, chief executive of the firm, said.

 'These conditions have adversely affected the financial performance of the group and the management team recognises that a reversal in the short term is unlikely.' The company said gross margins were expected to be further cut at the full year stage, after they fell 0.2 per cent in the first half.

 In its trading statement for the first six weeks of the second half, the company said like-for-like sales were up 1 per cent, with price inflation during that period also at 1 per cent.

 Kwik Save planned to embark on a strategic review, which would be ready by Christmas, the company said. 'There has been an acceleration of competitive pressures during the last six months, with significant levels of competitor opening and further substantial reductions in the prices of high volume commodity products.'  While rival chains from larger supermarkets had begun offering discounted items, and eating into Kwik Save's market share, its costs had also risen, as the group was integrating its Scottish stores, continued conversion of its smaller stores, and brought up to speed a key distribution centre.

 Margins improved in sales of chilled and frozen foods, but came under pressure on popular basic commodity lines, and distribution costs as a percentage of sales were 0.2 per cent higher than last year.



Kwik Save profit dives 29pc