New stores, higher sales boost Sheng Siong's Q1 earnings

SHENG Siong Group on Friday posted a 5.9 per cent rise in net profit to S$19.4 million for its first quarter ended March 31, as revenue increased 10.1 per cent to S$251.4 million.

The supermarket chain said the increase in revenue came mainly from Singapore's operations, as revenue from China was not yet significant. The 10 new stores opened in FY2018 contributed 10.6 per cent of the growth but it was offset by comparable same-store sales which shrank by 1 per cent, mainly because of cautious consumer sentiment and the opening of new supermarkets in the vicinity of some of its existing stores.

The higher earnings, on the back of higher revenue, were also offset by higher operating expenses as a result of the six new stores opened between April 2018 and December 2018. There were no new stores opened in Singapore or China in the first quarter of 2019. Sheng Siong also added that its subsidiary in China, which began operations in November 2017, broke even this quarter.

"As the group opened the highest number of new stores in 2018, some of the shrinkages were expected and consistent with the thinking of catching the shifting demographics within new or redeveloped HDB estates. Compared with Q4 2018 where comparable same-store sales contracted by 2.7 per cent, the contraction of 1 per cent in this quarter was a marked improvement," Sheng Siong said.

It also said the retail industry is expected to remain competitive. Besides competitive pressures, gross margin could be affected if input cost is increased because of food inflation. This could come about as a result of disruption to the supply chain or changes to prices caused by nations imposing trade tariffs.

The group has just secured three new HDB shops at Bukit Batok, Anchorvale Road and Sumang Lane which should start operating this May. It said that it will continue to look for retail space in areas to serve unreached and new customers, and will continue to bid in a rational manner for new HDB shops.

Meanwhile, the subsidiary in China will be opening its second supermarket in Kunming in the second half of the year. Sheng Siong said it will also continue to enhance its gross margin and improve cost efficiency by changing to a higher sales mix of fresh produce and deriving more efficiency gains in the supply chain.

The counter closed flat at S$1.04 on Friday before the results were announced.