Hutchison Whampoa Limited38
Operations Review – Retail
TurkeyPortugal
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Spain
France
Luxembourg
Switzerland
Hungary
Italy
Ukraine
Ireland
Belgium
Germany
The Netherlands
Czech Republic
Poland
Romania
Slovakia
Lithuania
LatviaUnited Kingdom
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Macau
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Mainland China
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Taiwan
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Hutchison Whampoa Limited38
operations review
• Total revenue increased 4% to HK$148,626 million.
• EBITDA increased 9% to HK$12,725 million.
• EBIT increased 8% to HK$10,048 million.
• The retail division contributed 37%, 15% and 17% respectively to the total revenue, EBITDA and EBIT of the Group’s businesses.
2012 Annual Report 392012 annual report 39
The retail division consists of the A S Watson group of companies, the world’s largest health and
beauty retailer in terms of store number.
retail
PARKnSHOP introduces a new lifestyle supermarket, TREAT, to Chengdu, China.
2012 annual report 39
Hutchison Whampoa Limited40
Operations Review – Retail
Group Performance
a s Watson currently operates 11 retail brands in europe and nine retail brands in asia, with over 10,800 stores in
33 markets worldwide, providing high quality personal care, health and beauty products; luxury perfumery and
cosmetic products; food and fine wines; as well as consumer electronics and electrical appliances. a s Watson also
manufactures and distributes various bottled waters and other beverages in Hong Kong and the Mainland.
2012 2011 HK$millions HK$ millions Change
Total Revenue 148,626 143,564 +4%
EBITDA 12,725 11,724 +9%
EBIT 10,048 9,330 +8%
In local currencies, growth in total revenue, EBITDA and EBIT for the year were 7%, 10% and 9% respectively. The retail division contributed 37%,
15% and 17% respectively to the total revenue, EBITDA and EBIT of the Group’s businesses.
The Group’s retail businesses are managed under five principal operating subdivisions: Health and Beauty China; Health and Beauty Asia (excluding
the Mainland); Health and Beauty Europe; Luxury Europe; and Retail Others and Manufacturing.
Revenue growth was strong across all subdivisions other than Luxury Europe, which was supported both by increased store numbers and year-on-
year comparable store sales growth. The division reported a 9% growth in total revenue in Asia compared to last year. Reported revenue in Europe
decreased by 1%, which was adversely affected by the weaker European currencies. In local currencies, revenue grew by 5% compared to last year.
Total Revenueby Subdivision
2012
143,564148,626
2010
116,098
2011
123,177
2008 2009
118,504
40,000
20,000
0
60,000
120,000
100,000
80,000
140,000
HK$ millions
36,951
16,638
61,618
18,051
15,368
Health & Beauty China Health & Beauty EuropeHealth & Beauty Asia Luxury Europe Retail Others (incl PARKnSHOP, Fortress, Watsons Wine & Nuance-Watson) and Manufacturing
10%
12%
42%
11%
25%
2011HK$143,564 million
2012HK$148,626 million
9%
12%
42%
13%
24%
2012 Annual Report 41
Stores
0
-200
200
400
600
800
2011Total Stores: 727
2012Total Stores: 844
-2315
375
152
325
Total Retail Store Number Growthby Subdivision
2%-3%
44%
39%
18%
5%6%
36%
32%
21%
Health & Beauty China Health & Beauty EuropeHealth & Beauty Asia Luxury Europe Retail Others (incl PARKnSHOP, Fortress, Watsons Wine & Nuance-Watson)
2012
844
727
2010
383
2011
576
2008 2009
386
Total Retail Store Numbersby Subdivision
13%5%
15%
15%
52%
11%5%
15%
17%
52%
20122010 20112008 2009
Health & Beauty China Health & Beauty EuropeHealth & Beauty Asia Luxury Europe Retail Others (incl PARKnSHOP, Fortress, Watsons Wine & Nuance-Watson)
2011Total Stores: 10,021
2012Total Stores: 10,865
Stores10,865
8,7189,294
8,335
2,000
0
6,000
4,000
8,000
10,000
488
1,438
1,656
1,684
5,599
10,021
ComparableStoreSalesGrowth(%) 2012 2011
Health & Beauty China 0.6% 7.8%
Health & Beauty Asia 5.8% 6.2%
Health & Beauty Europe 5.1% 2.9%
Luxury Europe -0.7% -0.2%
Retail Others (includes PARKnShop, Fortress, Watsons Wine & Nuance-Watson) 5.6% 11.6% TotalRetail 4.2% 5.1%
-Asia 4.8% 9.5%
-Europe 3.8% 2.2%
Note: Comparable store sales growth represents the % change in the net sales from comparable stores from the same period last year.
Hutchison Whampoa Limited42
Operations Review – Retail
2,293
712
5,067
1,624
3,02924%
13%
40%
5%
18%
2011HK$11,724 million
2012HK$12,725 million
21%
13%
40%
8%
18%
Health & Beauty China Health & Beauty EuropeHealth & Beauty Asia Luxury Europe Retail Others (incl PARKnSHOP, Fortress, Watsons Wine & Nuance-Watson) and Manufacturing
EBITDAby Subdivision
2012
12,72511,724
2010
7,986
2011
10,081
2008 2009
6,849
HK$ millions
2,000
0
4,000
10,000
8,000
6,000
12,000
EBITDA and EBIT growth were likewise solid across all subdivisions, other than Luxury Europe where consumer sentiment remains weak. The Group
recorded a 14% increase both in EBITDA and EBIT respectively in Asia against a revenue growth of 9%. EBITDA in Europe increased by 3% and EBIT
remained largely in-line compared to last year, against a negative revenue growth of 1%, as the reported numbers were adversely affected by the
weaker European currencies. In local currencies, EBITDA and EBIT improved by 7% and 4% respectively in Europe, against a revenue growth of 5%.
The division’s overall growth in Asia and in Europe reflects a competitive product offering, improving margin management, operating efficiencies
and the continuing focus on own-brand and exclusives sales.
Superdrug brings new energy to customers’ shopping experience by refreshing its store design in the UK.
2012 Annual Report 43
Stores
400
0
800
1,200
1,600
Health & Beauty China: Total number of retail stores
2012
1,438
1,063
2010
559
2011
801
2008 2009
410
Watsons expands its network in Mainland China with over 1,400 stores in more than 200 cities.
segment Performance
Health and Beauty china
2012 2011 HK$millions HK$ millions Change
Total Revenue 15,368 13,111 +17%
EBITDA 3,029 2,453 +23%
EBIT 2,767 2,262 +22%
HK$ millions
500
0
1,000
2,000
2,500
Health & Beauty China: EBITDA
2012
3,029
2,453
2010
1,200
2011
1,825
2008 2009
672
1,500
3,000
3,500
Watsons, currently a market leader in health and beauty in the Mainland, will continue to further expand its store portfolio. Total revenue grew by
17% compared to last year, while EBITDA and EBIT grew by 23% and 22% respectively. Comparable store sales growth for 2012 slowed to 0.6% due to
both weaker consumer sentiment and an increased number of new store openings, including locations in proximity to existing stores. However, total
revenue growth remained robust at 17% as all store openings continued to perform well with an investment payback period of less than one year.
The subdivision increased its total number of stores by 375 during the year and currently has more than 1,400 stores operating in the Mainland.
Hutchison Whampoa Limited44
Operations Review – Retail
Health and Beauty Asia: Number of Retail Stores by Market
2011Total stores: 1,532
12%
26%
7%16%
15%
2012Total stores: 1,684
19%
5%13%
29%
7%16%
14%
18%
3%
Hong Kong & Macau SingaporeTaiwan Malaysia Thailand The Philippines Other Asian Countries
Health and Beauty asia
2012 2011 HK$millions HK$ millions Change
Total Revenue 18,051 16,857 +7%
EBITDA 1,624 1,479 +10%
EBIT 1,313 1,176 +12%
In Asia, the Watsons business is a leading health and beauty retail chain with strong brand name recognition and extensive geographical
coverage. Combined total revenue grew by 7% compared to last year and comparable store sales growth was 5.8% (2011: 6.2%). EBITDA and
EBIT growth were 10% and 12% respectively, mainly due to increased contributions from the Watsons businesses in Hong Kong, Thailand,
Malaysia and the Philippines. The subdivision increased its total number of stores by 152 during the year and currently has more than 1,600
stores operating in nine Asian markets.
Watsons opens a flagship store in Singapore after the recent brand refresh.
2012 Annual Report 45
Health and Beauty Europe:Number of Retail Stores by Market
2011Total stores: 5,274
2012Total stores: 5,599
31%
21%
13%
2%
20%
13%
30%
22%
12%
1%
21%
14%
Germany United Kingdom and Ireland
Benelux Countries Poland Other Southern European Countries
Other Northern European Countries
Health and Beauty europe
2012 2011 HK$millions HK$ millions Change
Total Revenue 61,618 60,911 +1%
EBITDA 5,067 4,706 +8%
EBIT 3,770 3,578 +5%
Health and Beauty Europe consists of Watsons in Turkey and Ukraine; Kruidvat and Trekpleister in the Benelux countries; Rossmann joint-venture
stores in Germany and Central European countries; Superdrug in the UK and Ireland; Savers in the UK; Drogas in the Baltic States and Spektr in Russia.
The health and beauty businesses in Europe reported, in local currencies, a combined total revenue improvement of 8% over last year, mainly
due to the better sales performances of the Rossmann joint-venture and of Kruidvat in the Benelux countries, as well as increased contributions
from Savers in the UK and Watsons businesses in Turkey and Ukraine. Comparable store sales growth was 5.1% (2011: 2.9%). Despite the tough
economic environment in Europe, EBITDA and EBIT in local currencies increased by 14% and 12% respectively compared to last year. Health and
Beauty Europe added 325 stores during 2012, and currently operates more than 5,500 stores in 13 markets.
ICI PARIS XL is recognised as the Best Perfumery store in the Netherlands and Belgium in 2012, and has opened its first-ever store in Germany.
Hutchison Whampoa Limited46
Operations Review – Retail
2011Total stores: 1,679
2012Total stores: 1,656
33%
15%
18%
18%
Luxury Europe:Number of Retail Stores by Market
France United Kingdom and Ireland
Benelux Countries Other Southern European Countries
Other Northern European Countries
16%
34%
15%
19%
18%
14%
Luxury europe
2012 2011 HK$millions HK$ millions Change
Total Revenue 16,638 17,942 -7%
EBITDA 712 927 -23%
EBIT 352 550 -36%
The Luxury Europe subdivision comprises the three Europe-based luxury perfumeries and cosmetics retail chains: Marionnaud, The Perfume Shop
and ICI PARIS XL. The subdivision’s luxury businesses continued to be affected by the difficult economic situation and weak consumer spending
on non-essential luxury products in various European countries. In local currencies, total revenue decreased by 2% compared to last year, while
EBITDA and EBIT decreased by 27% and 48% respectively, primarily from the weaker performance of the Marionnaud Group.
The Marionnaud Group continued to face a challenging economic environment in various European countries in terms of both intense competition
and declining consumer sentiment. In local currencies, combined total revenue declined 5% compared to last year. In the UK and Ireland, The
Perfume Shop reported an increase in total revenue of 6% in local currencies, and in the Benelux countries, ICI PARIS XL reported steady growth in
total revenue of 2% in local currencies. Luxury Europe currently operates over 1,600 stores in 18 markets.
retail others and Manufacturing
2012 2011 HK$millions HK$ millions Change
Total Revenue 36,951 34,743 +6%
EBITDA 2,293 2,159 +6%
EBIT 1,846 1,764 +5%
Retail Others and Manufacturing consists of leading retail concepts in Hong Kong, being PARKnSHOP supermarkets and other related concept
stores; Fortress consumer electronics and electrical appliances stores; and Watsons Wine stores. The subdivision also includes PARKnSHOP and
Watsons Wine stores in the Mainland, Nuance-Watson in the Hong Kong and Singapore international airports, as well as the manufacturing and
distribution of well-known brands of bottled water, fruit juices and soft drinks in Hong Kong and the Mainland. This subdivision, which currently
operates over 480 retail stores, reported total revenue growth of 6% and comparable store sales growth of 5.6% (2011: 11.6%), while EBITDA and
EBIT improved by 6% and 5% respectively.
2012 Annual Report 47
The new lifestyle retail brand SU-PA-DE-PA is the family destination for food, fashion, homeware, gadgets and fun.
Retail Others (incl PARKnSHOP, Fortress, Watsons Wine & Nuance-Watson):Number of Retail Stores by Segment
2011Total stores: 473
2012Total stores: 488
67%
9%5%
19%
64%
15%
5%
16%
Fast-moving Consumer Goods Airport Concessions Wine RetailingConsumer Electronics
PARKnSHOP in Hong Kong delivered good EBITDA and EBIT growth, driven by the continuous efforts in driving store productivity and cost
efficiency. PARKnSHOP in Hong Kong currently has over 270 stores. Fortress reported an 11% growth in total revenue, with a corresponding
growth in EBITDA and EBIT for the year and currently has 90 stores. Watsons Wine reported growth in total revenue as consumer spending on wine
continued to grow, but EBITDA and EBIT declined mainly due to margin pressure as well as rising rental and other costs. Watsons Wine currently
has over 20 stores.
In the Mainland, the PARKnSHOP operations reported declines in total revenue, EBITDA and EBIT in 2012, reflecting lower consumer spending
attributable to the slower economic growth in the Mainland.
The Nuance-Watson business reported total revenue, EBITDA and EBIT growth, driven by increased passenger spending and traffic. The expiration
of Nuance-Watson’s two core licences at the Hong Kong International Airport in late 2012 will reduce its contribution to the overall performance
of this subdivision in 2013.
Manufacturing operations reported a 6% increase in total revenue primarily driven by strong results in the Mainland.