This article first appeared on GuruFocus .
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Revenue:$4.1 billion, up 4% year-on-year.
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Underlying Profit:$117 million, up 44%.
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Interim Dividend:$0.062 per share, up 77%.
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Like-for-Like Sales:3% growth in the first half of 2026.
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Health & Beauty Sales:8% growth, 6% like-for-like.
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Convenience Sales:4% growth, 2% like-for-like.
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Home Furnishing Sales:4% like-for-like growth.
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Maxim's Revenue:$1.4 billion, up 4% year-on-year.
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Operating Cash Flow:Up 16% for the first half.
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Free Cash Flow:$85 million.
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Capital Expenditure:$93 million.
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Return on Capital:11.7%, up from 9.4% at the end of last year.
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SG&A Costs:Declined 15% on a like-for-like basis.
Release Date: July 29, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Underlying profit increased 44% in the first half of 2026, driven by strong earnings recovery in IKEA and Food, lower SG&A costs, and reduced financing costs.
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Like-for-like sales improved consistently to 3% growth, with Health & Beauty gaining market share across all key markets and Convenience returning to growth after 10 consecutive quarters of decline in Hong Kong.
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The digital ecosystem, including retail media and e-commerce, is now margin accretive to stores, contributing 35% of revenue growth with a 300% increase in DFIQ Media.
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IKEA achieved a sharp turnaround with 4% like-for-like sales growth (vs. -6% a year ago) and operating profit up 85%, driven by price investments and cost optimization.
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The company raised its full-year guidance for sales (to 3%-4% organic growth) and underlying profit (to $285-$305 million), reflecting strong momentum and confidence in delivering top-end results.
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Interim dividend increased 77% to $0.062 per share, with a strong balance sheet and cash generation supporting flexibility for inorganic opportunities.
Negative Points
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Health & Beauty operating margin declined 40 basis points due to intensified competition in Malaysia and growth of third-party marketplaces like TikTok and Shopee.
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Food business in Hong Kong remains challenged by cross-border shopping to Shenzhen, though the price gap has narrowed to a 3% discount, requiring ongoing price investments.
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Cigarette sales, while stabilized, still represent a significant portion of Convenience revenue, and the pivot to higher-margin categories like ready-to-eat is still in progress.
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The Cody Hong Kong acquisition is expected to be mildly dilutive in year one, with profitability not expected until 12-18 months out.
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SG&A savings, while strong (down 15% like-for-like), may be partially reinvested in AI and pricing, limiting near-term margin expansion.
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Malaysia's promotional environment and government vouchers (MySARA) that exclude health & beauty stores have temporarily shifted volumes, pressuring margins.
Q & A Highlights
Q: Given the stronger revenue outlook for 2026, does that change your thinking on the 2028 targets, specifically the 2% to 3% three-year revenue CAGR guidance? A: Tom Van der Lee (Group CFO): We are not ready to revise our long-term guidance, but we are quite confident that we will deliver at least the top end of the 2026 guidance we just raised. For now, you should take the top end of the revised range into account.
Q: Could you share more color on the margin profile progress in the first half and what we should look for in the second half? Are there any other factors that might harm operating margins? A: Tom Van der Lee (Group CFO): Health & Beauty margins were pressured by strategic investments in Malaysia and the growth of third-party e-commerce platforms, but we expect the second half to be much better. Convenience margins were broadly stable with a small rounding impact, and we expect improvement in the second half. Food margins improved on direct sourcing, and IKEA is expected to be flat. Overall, the second half will be better than the first half, and we are on track to deliver the margins indicated at our Investor Day. Scott Price (Group CEO) added that the portfolio's flexibility is a competitive advantage, allowing for strategic investments without harming shareholder returns.
Q: On Food, now that our basket size is trading at a discount to the GBA area, how do we think about price investment going forward? Is it going to stabilize, or are we still going head-to-head with onshore retailers? A: Scott Price (Group CEO): We have achieved the right margin mix and price point, and with a 3% discount to Shenzhen, we don't need significant further investment in price. We can now pivot more towards own brand and potentially open new stores in Hong Kong. We see margin expansion as an opportunity here and don't need to invest in further volume share without value share and positive revenue growth.
Q: On the Malaysia Health & Beauty promotional spending, is it a price investment or are we ramping up the sales force? A: Scott Price (Group CEO): It is very much a pricing pivot, not an infrastructural investment. We are selectively investing in promotions where we have to, while migrating towards an everyday low price model. Tom Van der Lee (Group CFO) added that Malaysian government vouchers, which can only be spent in supermarkets, have intensified competition in the H&B channel. This is temporary, but we must hold on to market share during this period to avoid a bigger loss tomorrow.
Q: Could you share the store additions and closures by segment to gauge CapEx appetite? A: Tom Van der Lee (Group CFO): The major growth in the first half was in China (7-Eleven) and Indonesia, in line with our growth ambitions. We always close unprofitable stores, but the payback for new stores is very strong at around two years. Scott Price (Group CEO) added that the rental model in Asia gives flexibility, and as we have refined our assortment and increased market share, landlords want us in their malls, giving us a greater negotiating position.
Q: On the Cody Hong Kong acquisition, how does out-of-home advertising fit into the broader DFIQ Media strategy? A: Scott Price (Group CEO): We are not getting into outdoor advertising. The acquisition is about accessing a pool of media dollars we couldn't break into before. It allows us to bundle deals with our in-store screens. It is a very good strategic buy and does not signal a sectoral pivot. Tom Van der Lee (Group CFO) added that the acquisition cost less than USD 4 million, will be close to breakeven next year, and will not be dilutive.
Q: On the restatement of corporate overheads into operating segments, how much was the impact in absolute terms, and where did most of the allocations go? A: Tom Van der Lee (Group CFO): We reallocated roughly $9 million from the center to the formats. By format, roughly $3 million for Health & Beauty, similar amounts for Food, $2 million for Convenience, and about $0.6-0.8 million to IKEA. This makes the formats more agile and accountable for reducing costs. Scott Price (Group CEO) added that every dollar of overhead must be correlated to profit, and this process resulted in a very clean P&L.
Q: Can you elaborate on the drivers to achieve a much better Health & Beauty margin in the second half? And on CVS, despite higher RTE and online sales penetration, why is the margin broadly stable year-on-year? A: Scott Price (Group CEO): For Health & Beauty, the Malaysia investment was a one-time event. We are continuing to invest in own brand, wellness, and AI, which have higher margins, and we are very confident moving forward. For CVS, the margin was stable because we are rebalancing our go-to-market strategy. We had 10 quarters of negative growth in Hong Kong, which increased overhead as a percent of revenue. Now that we have pivoted to growth, we are entering a virtuous cycle. Tom Van der Lee (Group CFO) added that cigarette sales stabilized and even increased in Singapore due to the vaping ban, which is lower margin but still contributes to the bottom line.
Q: SG&A as a percentage of sales is now at 1%, ahead of the 2028 target. Can we expect further cost savings moving forward? A: Tom Van der Lee (Group CFO): Yes, SG&A will be a bit higher in the second half, but the full year will be lower. These cost-saving programs are large and multiyear. We started another saving program at the start of this year, and we are confident we will beat the 2028 target on overheads. Some of the savings might be reinvested in AI or price, but we need that flexibility.
Q: Given Cody Hong Kong was loss-making in 2024 and '25, what is the plan to turn the company around and achieve positive accretion within 12 to 18 months? A: Scott Price (Group CEO): It is a stand-alone business with overhead and systems we don't need. We have the ability to run it at a much lower cost. It is gross profit positive on the contracts with out-of-home providers. We believe it should be breakeven within 18 months, but from day one, it brings more revenue to our high-margin retail
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
