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Tag: circle k

  • Vietnam retail on brink of convenience store boom

    Vietnam retail on brink of convenience store boom

    Vietnam retail is on the brink of a convenience store boom as multinationals muscle up against fast-expanding local players.

    The increasing pace of life in urban Vietnamese cities is fuelling demand for convenience stores which, until three to four years ago, seemed few and far between on the streets of Ho Chi Minh City and Hanoi.

    Since then, numerous c-stores have been opened by foreign retailers, such as Japan’s Family Mart, Thailand’s B’smart and US-founded Circle K, competing against local ones, such as C-Express, VinMart, and Co.op Food. According to a Nielsen survey, six out of 10 Vietnamese buyers shop at c-stores because of their advantageous location and five out of 10 because of good design and displays. Local students are the main customers during lunchtime, attracted by comfortable dining spaces, cool temperature and free wifi.

    Pham Ngoc Hung, VP of HCMC Business Association, said the HCMC market is attractive to Thai retailers with 98 B’smart stores and 10 C-Express by Big C stores already trading. In the meantime, local chain VinMart by VinGroup, is approaching 700 stores and is reportedly opening an average of two new stores nationwide each day.

    The fastest-growing chain in the HCMC is Circle K, the local rights owned by Vong Tron Do company. It has 150 stores and promises for further expansion. Today, in every residential quarter, there are two or three Circle K  stores, usually less than 600m apart.

    But the c-store boom is only just beginning. Last year, Japanese c-store giant 7 Eleven signed a master franchise agreement with Seven System Vietnam to expand across the country. The first stores are scheduled to open in 2017, and the target is 1000 within 10 years. CP All, which operates more than 8000 7-Eleven stores in Thailand, is a partner in the Vietnam venture and says it plans for 40 per cent of its stock to be locally sourced, with the balance from Thailand and elsewhere.

    Existing operators are waiting to see what type of stores 7-Eleven will roll out in the Vietnam market – given the considerable difference in sizes of its Thai stores – and the morphing of the format by Circle K in Vietnam to include dining area and fast food focus.

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  • Convenience Retail to offload Circle K Guangzhou

    Convenience Retail to offload Circle K Guangzhou

    Convenience Retail Asia, the Hong Kong-listed operator of Circle K convenience stores and Saint Honore Cake Shops in Hong Kong, Macau and Guangdong province, has reported a 36.8 per cent decline in first half year profit.

    While sales increased 5.8 per cent in the half year to HK$2.368 billion, labour and raw material costs increased, reducing its gross margins, and it incurred substantial investment costs in its eCommerce business.

    Along with its results, the company announced it would sell its stake in the loss-making Circle K Guangzhou business to its controlling shareholder and focus on the Circle K business in Hong Kong and Macau. Fung Holdings (1937) Limited will pay CRA HK$104.5 million for its share of the business.

    “The sale of the Circle K Guangzhou will help to create positive momentum for the Group’s financial performance in a difficult retail and economic environment that continues to place pressure on the results of the group,” said Richard Yeung, CRA CEO.

    “This sale, which will also result in a one time gain ($50 million), underlines our focused commitment to delivering long-term growth, profitability and shareholder value.”

    In the half year, turnover for the Circle K business increased 5.7 per cent to HK$1.902 billion, with comparable store sales rising 8.8 per cent in Hong Kong and 2.6 per cent in southern China.

    Turnover for Saint Honore Cake Shops rose 5.5 per cent to HK$498 million, with 4.1 per cent growth in comparable stores sales in Hong Kong. Core operating profit of the group decreased by 34.6 per cent to HK$42 million and net profit declined by 36.8 per cent year on year to HK$31 million.

    During the first half, the group incurred higher expenditure to support intensive marketing campaigns for its e-commerce platform FingerShopping.com, and because of investment in a pilot programme launched in late 2014 with Sinopec Marketing. The pilot program manages 10 petrol stations in addition to Easy Joy convenience stores on behalf of Sinopec Marketing in Guangzhou. Excluding the Projects expenses, core and net operating profit would have decreased, respectively, by 18.5 per cent to HK$57 million and by 16.1 per cent to HK$45 million.

    Gross margin and other income as a percentage of turnover decreased slightly by 0.8 per cent to 36 per cent compared to the same period in 2014, due to rising raw material prices and factory labour costs. Operating expenses as a percentage of turnover increased from 33.9 per cent to 34.2 per cent because of the higher operating costs as well as increased marketing and investment expenditure in projects.

    “Our ability to drive higher comparable store sales despite adverse external conditions is also a reflection of our unwavering commitment to excellent customer service, in-demand products and services, and timely, effective marketing,” Yeung added.

    “We believe these indications of strong brand equity and customer loyalty will be invaluable once the retail sector begins to improve. However, we anticipate that higher costs and declining spending will continue to affect our operations for the remainder of 2015.”

    Yeung said the company’s online consumer platform, FingerShopping.com, continued to make encouraging progress in the first half of the year. Health and beauty is the platform’s most successful anchor category.

    “FingerShopping.com is enjoying increasing customer loyalty and continues to expand its product roster, which includes a number of popular brand names. The group is now testing FingerShopping.com’s delivery services in Guangzhou and has also secured partnerships with leading Hong Kong banks as well as promotional campaigns with major retailers in Hong Kong.”

    CRA says it expects the retail market to remain weak in the foreseeable future and operating costs are likely to remain high.

    “We are trying our best to mitigate the adverse market conditions through our exit from the convenience store business in Guangzhou while continuing to invest in FingerShopping.com, strengthening our operations to retain talent, delivering first-rate customer service and driving cost efficiency,” Yeung concluded.

  • Costs rise for Circle K Hong Kong

    Costs rise for Circle K Hong Kong

    Convenience Retail Asia says sales in its convenience stores and bakeries rose marginally last year, but rising costs dented profits.

    CRA, part of the Fung Retailing group, operates 604 retail stores in southern China. It has 329 Circle K stores in Hong Kong and 127 outside the SAR and 148 Saint Honore bakery stores in Hong Kong, Macau, Guangzhou and Shenzhen.

    The company has reported revenue of HK$4.736 billion for the year to December 31, a 4.8 per cent increase over 2013. The group says the higher sales were achieved despite unfavourable retail conditions, including flat consumer sentiment, declining spending on festive products and higher operating costs.

    But core operating profit fell nine per cent to HK$153 million compared to last year.

    “This was largely because of rising cost pressures, which outweighed growth in comparable store sales across all markets. The group made investments in its eCommerce business FingerShopping.com as well as a pilot programme with Sinopec Marketing to manage 10 petrol stations and Easy Joy convenience stores in Guangzhou.

    CRA’s net profit declined by 19.5 per cent to HK$121 million due to the same issues impacting core operating profit, as well as reduced interest income from lower bank deposits after a special dividend payout in 2013 and an exchange loss from the depreciation of the Chinese renminbi currency during the year.

    The Circle K and Saint Honore businesses delivered “satisfactory performances” in 2014 on the back of solid comparable store sales. Turnover for the convenience store business was HK$3.752 billion, up 4.9 per cent year-on-year. Comparable store sales in Hong Kong and Southern China increased by 5.4 per cent and 5.8 per cent respectively against 2013. Turnover for the Saint Honore Cake Shop business increased by 3.2 per cent to HK$1.049 billion. This was primarily due to low-single-digit comparable store sales growth in Hong Kong in 2014.

    Gross margin and other income as a percentage of turnover was stable. Operating expenses as a percentage of turnover increased from 33.2 per cent to 33.8 per cent because of higher rents and operating costs, as well as start-up expenses for FingerShopping.com and the pilot programme with Sinopec Marketing.

    CEO Richard Yeung said Circle K and Saint Honore are in “advantageous positions” to capitalise on any rebound in the domestic economy”.

    “While our outlook for 2015 is conservative, we are confident in our ability to drive results through aggressive customer acquisition and organic growth. We have many new initiatives to strengthen our brands and our businesses, especially the investment in FingerShopping.com and collaboration with Sinopec Marketing to operate petrol stations and Easy Joy convenience stores in China.

    “We believe that a favourable customer experience is the key to building brand loyalty, repeat purchases and positive word-of-mouth referral and we are very pleased with our efforts in this area. Also, our core operations and financials remain healthy.”

    The Hong Kong retail sector saw a slowdown in 2014, ending a long period of high growth. Primary causes were flat consumer sentiment among locals and a decline in spending by Chinese Mainland tourists. High rents and the on-going labour shortage continued to impact the group’s operating costs in Hong Kong. On the Chinese mainland, the year-on-year growth of total retail sales posted a slight drop from 13.1 per cent in 2013 to 12 per cent in 2014.

    CRA says it responded by focusing on strict cost controls, innovative marketing and promotions, and the continued rollout of employee satisfaction and retention initiatives. In the year ahead, CRA anticipates the slowdown in Hong Kong will continue due to flat local sentiment and moderate spending by Chinese mainland tourists.

    “The group also expects high operating costs to continue, particularly in the areas of rent and labour, as well as more challenges on the horizon in Hong Kong due to proposed standard working hours, a minimum wage review and new plastic bag levy.”

    The company is more optimistic about the mainland market: “On the Chinese Mainland, the government is expected to encourage spending by the middle class. The group believes this could benefit the convenience retail industry.”

  • Circle K opens 100th outlet in Vietnam, to add 50 more by year end

    Circle K opens 100th outlet in Vietnam, to add 50 more by year end

    US-owned 24-hour convenience store Circle K has opened its 100th outlet in Vietnam and expects to have 150 by the year’s end.

    Vietnam CEO Tony Yan was optimistic about achieving the target, saying Vietnam’s modern retail industry was in the initial development phase.

    While modern retail represented only 13 percent of the total market share in the country compared to 50 percent elsewhere in Asia, Vietnam was a promising market of 90 million people with rising incomes, he said.

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