The popular Hong Kong fast food chain’s revenue, profit and gross margin all fell in its latest fiscal year, as it suffers from fundamental shifts in its home market
Key Takeaways:
- Café de Coral’s revenue sagged 1.4% in its latest fiscal year, while its profit plunged nearly 30%
- The popular Hong Kong fast food chain’s gross margin also fell to 10.4% for the year, amid rapid changes on the city’s dining scene
Café de Coral Holdings Ltd. (0341.HK) has been Hong Kong’s dominant food chain for half a century, but its age is showing lately, as it fights to retain local diners in the face of a sluggish economy and changing dining trends.
The company’s gloomy picture was on display for all to see earlier this month in its latest financial report that was hardly a feast for investor eyes. Its revenue declined 1.4% to HK$8.57 billion ($1.09 billion) in its latest fiscal year through March, while its profit sank 29.6% to HK$233 million. Even excluding fair-value losses related to property assets, the company’s profit was still down 25.2% to HK$330 million. Café de Coral’s gross profit margin also fell 1 percentage point to 10.4% during the year.
The company blamed the misery on an economic slowdown, as well as “weak consumer appetite, outbound travel and consumption of Hong Kong residents.” It also pointed the finger at “intensifying price competition in the Mainland,” a reference to Mainland China, where many of the company’s customers are now flocking for weekend daytrips and getaways, drawing away one of its most important sources of business.
Investors could shrug off the weak year as just a blip on the radar, especially as Hong Kong’s economy continues to suffer from a post-pandemic hangover. But what could be more worrisome is the possibility that the former Hong Kong king of casual dining, and its home restaurant market, are descending into a structural …