On August 22, Daoxiang Holdings (00573. HK) announced its 2024 interim financial results. According to the financial report, in 2024, Daoxiang will achieve operating income of HK $1.286 billion, a year-on-year decrease of 14.6%; Net profit was HK$4.022 million, down 88.0% year-on-year.
Founded in Hong Kong in 1991, the "Daoxiang" brand entered the mainland market in 2000 with the opening of its first store in Shenzhen. At present, Daoxiang Holdings mainly provides catering services through its chain restaurants and cake shops, and its catering brand in the mainland is mainly "Daoxiang", while in the Hong Kong market, there are also catering brands such as "Zhong Cai Guan", "Chaoxi Hui" and "No. 1 Fishing Boat", as well as bakery and pastry brands such as "Taichang Bakery", Hong Kong is its largest market.
Daoxiang Holdings' catering brand
In the first half of this year, Daoxiang Holdings' revenue from the Hong Kong market was HK$838 million, accounting for 65.16%, down 6.05% year-on-year, and net profit fell 75.98% year-on-year to HK$5.5 million. In response to the decline in revenue in the Hong Kong market, Daoxiang Holdings said that in the first half of this year, the new normal of Hong Kong people's northbound consumption continued, with a deficit of more than 100,000 people on weekends and long holidays, coupled with the change of consumption patterns and rising labor costs, which had an impact on the business. On the other hand, the revenue of its high-end brand "Zhong Cai Guan" and "Chaoxi Hui", which mainly deals in weddings, banquets and corporate events, remained stable.
Compared with the Hong Kong market, Daoxiang Holdings' revenue in the mainland market declined more obviously, with HK$447 million in the first half of this year, accounting for 34.76%, down 26.96% year-on-year, and turned from profit to loss, with a net loss of HK$1.5 million, compared with a profit of HK$10.5 million in the same period last year. Daoxiang Holdings pointed out that this was mainly due to the closure of its underperforming branches in the first half of this year, as well as the restoration and renovation works of some closed branches, resulting in one-time asset write-offs and related expenses.
As of June 30, Daoxiang Holdings reduced its number of stores in Chinese mainland to 30 from 41 in 2023. Daoxiang Holdings said that the closure of some branches is in line with the group's future development plan. In fact, in the past few years, the number of Daoxiang Holdings' stores in the mainland market has been shrinking, and from 2021 to 2023, the number of its stores will be 49, 45 and 41 respectively.
Nandu Bay Finance Society previously reported that at the end of February this year, Daoxiang Holdings closed its store in Tianhe City, Guangzhou, which has been in business for more than 20 years, and the store staff revealed to reporters that the store was closed due to the expiration of the contract, the rent rose, and the shop rent was high, and the boss decided not to renew the contract. At the same time, according to employees, the business of the store is not as good as before.
Daoxiangyuan is located in Guangzhou Tianhe City store
In the face of increasingly fierce price competition in the mainland catering market, Daoxiang Holdings is indeed feeling the pressure. In its financial report, it pointed out that in Chinese mainland, although the revenue of the catering industry increased slightly year-on-year, the market competition became more and more fierce, and the aggressive price strategy and customers' pursuit of the ultimate cost performance caused the catering industry to increase revenue but not increase profits. It will accelerate product development and improve product quality, while at the same time, it will pay close attention to consumer demand and adjust menus, product pricing, service offerings and marketing strategies in line with market trends.
In addition to the Hong Kong and mainland markets, Daoxiang Holdings also wants to seek growth in overseas markets, and plans to expand into markets such as Malaysia, Thailand, Australia and United Kingdom, hoping to increase sales volume and profits.
In response to the continuous shrinkage of Daoxiang Holdings' stores in the mainland market, on August 23, a reporter from Nandu Bay Finance Society contacted Daoxiang Holdings, but as of press time, the reporter has not received a reply.
Written by: Nandu · Bay Finance Agency reporter Zhan Danqing intern Chen Menger