Retail revenue flat for CK Hutchison

Retail revenue was flat for the first six months for conglomerate CK Hutchison, the parent of the AS Watson Group health and beauty chain.

At the end of June, CK Hutchison had more than 13,500 stores across 24 markets with a total unaudited revenue of HK$15.8 billion (US$2 billion). EBIT of $5.2 billion was 2 per cent lower than the same period last year because of adverse foreign-currency translation effects. In local currencies, sales grew by 3 per cent.

There was solid growth in the health-and-beauty segment, including some improvements in trading conditions in Mainland China, reports chairman Li Ka-shing. The segment contributed 94 per cent of the division’s EBITDA with revenue growth of 7 per cent.

However, the profitability of retail business in Hong Kong continued to be under pressure from lower tourist numbers and a drop in local demand, as well as higher rental and wage costs, he said.

Trading conditions generally improved in Asia, with solid comparable-store sales growth of 3.2 per cent for health and beauty despite the division’s largest profit contributor, China, reporting a 6.2 per cent drop for mature stores. Encouragingly, says the group, the decline has recovered from last full year’s 10.1 per cent drop, narrowing to 2.7 per cent down in this year’s second quarter.

Despite the tough retail conditions, health and beauty for China still maintained a 21 per cent EBITDA margin, reinforcing its sustainable profitability even in challenging environments.

The retail division plans to continue expanding its store network through organic growth in the second half of this year, as well as focussing on developing big-data analytics capabilities to complement the extensive global store network.

The AS Watson Group has more than 12,000 stores in 25 markets, serving more than 28 million customers every week. CK Hutchison Holdings has a 75 per cent stake after the balance was sold to Singapore’s government-owned Temasek Holdings in 2014.

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