Fast-food chain Cafe de Coral Holdings on Monday reported a significant drop in net profit after months of social unrest and the COVID-19 outbreak devastated Hong Kong’s food and beverage sector (F&B).
Cafe de Coral Holdings chairman Sunny Lo Hoi-kwong said that while travel restrictions and social distancing measures have reduced coronavirus infections in the city, they had also severely affected many sectors of the economy – including the F&B industry.
Revenue dropped by 6.2 percent to HK$7.96 billion
The company's profit attributable to shareholders plunged 87.1 percent year-on-year to HK$73.6 million for the year ended March 31, as business was greatly affected by the coronavirus. Revenue dropped by 6.2 percent to HK$7.96 billion.
Performance across the group’s businesses further declined in the second half of the year, the company said in an annual report.
With Hong Kong people confined to home and strict social distancing measures in place to halt the spread of the virus, demand for eating out in the city fell dramatically.
At the beginning of June, the Hong Kong government extended an eight-person limit on public gatherings until June 18. This is after a new coronavirus cluster was reported.
Cafe de Coral Holdings reported a deficit in the first quarter of 2019 during the COVID-19 outbreak, which has offset most of the profits it made previously. The company’s performance did not get much better in April and May, chief executive Peter Lo Tak-hing said.
The quick-service restaurant business has been affected mostly in terms of scale. Same-store sales growth dropped 6 percent for its flagship brand, Cafe de Coral reported.
The casual dining business, including brands such as Shanghai Lao Lao and Mixian Sense, was hit particularly hard as demand evaporated – especially during weekends and dinner times – which used to be the peak time.
The group’s institutional catering business was also suffered from restrictions on visitor numbers in hospitals and school being closed for months. This greatly reduced demand for its school lunch catering business.
Students in Hong Kong are now returning to school in stages from May 27 after four months of class suspensions.
To protect profit margins, the company is renegotiating rents and reviewing lease agreements with landlords to optimize cost structures in the future. At present, about 40 percent of the landlords agreed to cut rents by about 10 percent, said Lo.
Cafe de Coral is fine-tuning dishes and updating menus to optimize meals for food delivery services. The demand for this service has increased dramatically since the pandemic outbreak.
Industry experts predict Cafe de Coral will experience a shift from in-restaurant dining to a broader mix of in-store and delivery options.
Cafe de Coral’s product-selling price dropped 5 cents on average at the end of March compared with one year earlier.
The company operated a total of 356 stores in the 2019-20 fiscal year, compared with 358 in the 2018-19 fiscal year.
The company’s board did not recommend a final dividend for the year – for the first time in two decades.
