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PR Newswire
02-08-2021, 09:53 PM
In my view:
DF's financial performance has deteriorated and disappointed since 2014. The 69% fall in underlying profit in 1H2021 is a shock. Given that COVID-19 is likely to prolong (due to the more contagious delta variant), earnings would continue to be pressured. In the near-term, the market would likely take a cautious and negative view on DF's prospects; valuation should drop.
Ian McLeod turned around Coles in Australia. Under his charge, business fundamentals and underlying profitability of DF's grocery retail seems to be on an improving trend. DF however faces many challenges across geographical regions and business segments.
DF’s share of Yonghui’s underlying losses of USD 31M for the six months ended 31st March 2021 points to another new challenge. Amidst rising online competition, how badly would Yonghui be hit. Would DF have to write down its investment in Yonghui in the months or years ahead? Would rising online competition also start to impact 7-Eleven and Mannings's profitability in China?
The lesson learnt from the deterioration of DF's business fundamentals and the consequent loss in economic value is that the retailing of everyday consumer goods, due to its largely non-differentiated nature, is a highly competitive business. It requires a constant watchful eye on operating standards, low costs, low prices and attunement to changing market forces and consumer preferences.
DF's financial performance has deteriorated and disappointed since 2014. The 69% fall in underlying profit in 1H2021 is a shock. Given that COVID-19 is likely to prolong (due to the more contagious delta variant), earnings would continue to be pressured. In the near-term, the market would likely take a cautious and negative view on DF's prospects; valuation should drop.
Ian McLeod turned around Coles in Australia. Under his charge, business fundamentals and underlying profitability of DF's grocery retail seems to be on an improving trend. DF however faces many challenges across geographical regions and business segments.
DF’s share of Yonghui’s underlying losses of USD 31M for the six months ended 31st March 2021 points to another new challenge. Amidst rising online competition, how badly would Yonghui be hit. Would DF have to write down its investment in Yonghui in the months or years ahead? Would rising online competition also start to impact 7-Eleven and Mannings's profitability in China?
The lesson learnt from the deterioration of DF's business fundamentals and the consequent loss in economic value is that the retailing of everyday consumer goods, due to its largely non-differentiated nature, is a highly competitive business. It requires a constant watchful eye on operating standards, low costs, low prices and attunement to changing market forces and consumer preferences.