Since the Singapore government raised the DORSCON level to Orange in early February this year, panic buying spread across the nation and supermarket shelves were emptied faster than it could be replenished.
On the back of the increased demand of essential groceries during the Covid-19 period, supermarket operator Sheng Siong saw a 150.7% surge in 2Q20 earnings to $46.1 million, from $28.4 million in 2Q19.
On a half-year basis, 1H20 earnings came in at $74.8 million, almost double that of $37.8 million recorded in 1H19.
Revenue for the quarter was 75.8% higher at $418.7 million from $238.2 million a year ago.
This increase is mainly attributable to the elevated demand arising from Covid-19, as consumers stocked up to hedge against the risks of disruption to the supply chain and the implementation of the Circuit Breaker period, which restricted people’s movements and banned eating out. Hence, this benefitted retailers of fresh and uncooked food.
New stores in Singapore saw 13.3% y-o-y growth in revenue, while comparable same stores saw 61.2% y-o-y growth.
Revenue from the company’s stores in Kunming China continues to grow at a healthy pace as revenue from Sheng Siong’s China business increased by 1.3% y-o-y.
With cost of sales increasing 74.1% y-o-y to $301.1 million, 2Q20 gross profit came in 80.2% higher at $117.6 million from $65.2 million in the previous year.
Gross margin for 2Q20 was 28.1%, higher than 27.4% in the same period last year, because selling prices were underpinned by the strong demand, while sales mix improved to a higher proportion of fresh goods which commands a higher gross margin and generally stable input prices arising from diversification in sourcing and particularly in 1Q20, the increase in the volume of house-brands.
Other income saw a 264.1% surge y-o-y to $6.9 million.
Overall expenses were higher y-o-y to cope with the increased volume amid Covid-19 and to implement safe distancing measures. Sheng Siong saw distribution expenses increasing 88.8% to $2.8 million, administrative expenses were 54.5% higher at $65.8 million and other expenses grew by 22.5% to $0.9 million.
As at end-June, Sheng Siong’s cash and cash equivalents stood at $252.2 million.
The board has also declared an interim dividend of 3.5 cents per share, double that of 1.75 cents per share declared in the same period a year ago.
Lim Hock Chee, CEO of Sheng Siong says, “Going forward, expanding our retail network in Singapore particularly in areas where our potential customers are residing, remains as one of the top priorities of the group. “
“Our key focus remains unchanged where we will continue to drive the growth of the new stores and further enhance same store sales in Singapore and China while we remain committed to drive cost efficiency and enhance gross margin by working towards a sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain,” he adds.
Shares in Sheng Siong closed on July 29 at an all-time high of $1.73.
