SINGAPORE (July 27): Supermarket chain operator Sheng Siong Group saw its earnings for the second quarter ended June grow 6.1% to $16.1 million from $15.2 million a year ago.
This brings 1H17 earnings to $33.2 million, up 5.3% compared to $31.6 million in 1H16.
An interim cash dividend of 1.55 cents per share has been declared.
Revenue for the quarter increased 6.8% to $201.5 million from $188.8 million in the previous year, mainly on contributions from the group’s four new stores which opened in FY16 and contributed to 5.2% of total revenue.
While a 0.9% growth in comparable same stores sales was registered compared with 1Q17’s flattish growth due to improved consumer sentiment, this was offset by decline in footfall of the stores in areas affected by the slowdown in the oil and gas industry, the store at Tampines which was undergoing renovation, and the Woodlands store, says Sheng Siong.
Most of the residents in the affected blocks in the vicinity of the Woodlands store had moved as the closure date drew near and consequently sales at this store has been affected.
Excluding the contraction from the Woodlands store, comparable same store sales growth would be 1.2% and 1.7 % for 1H17 and 2Q17 respectively.
Gross margins grew to 26.6% in 2Q compared to 26.1% a year ago, mainly because input cost was lowered by efficiency gains derived from the central distribution centre and a higher level of suppliers’ rebates, as well as better sales mix of higher gross margin fresh versus non-fresh produce.
At the same time, administrative expenses increased 5.6% to $33.6 million from $31.8 million on an increase in staff costs, as more headcounts were needed to operate the new stores and a higher bonus provision as a result of the higher operating profit.
In its outlook, Sheng Siong says it expects competition in the supermarket industry to remain keen, adding that a recovery in demand could be uncertain if the local economic conditions continue to remain lacklustre.
The group adds that it is still looking for suitable retail spaces in areas where it does not have a presence – although finding suitable retail outlets or successfully bidding for new HDB shops may be challenging.
“Moving ahead, we will continue with our efforts in expanding our retail space in Singapore, particularly in locations where we do not have presence to reach out to our potential customers. At the same time, we remain committed to nurture the growth of our new stores. In order to enhance our operating margin, we will stay focused to lower our input cost by increasing direct purchasing, bulk handling and changing the sales mix to a higher proportion of fresh produce,” says group CEO Lim Hock Chee.
Shares of Sheng Siong closed 4.5% lower at 95 cents on Thursday.
