7-Eleven Malaysia committed to store expansion

7-Eleven Malaysia is committed to further store network expansion despite the economic headwinds in the nation.

Releasing the company’s third quarter results, CEO Gary Brown said the network now numbering 2057 stores achieved sales growth of 5.5 per cent in the three months to September 30, despite a sluggish retail market.

However there was a “significant negative impact” from the increase in the minimum wage from July 1 on third-quarter profit.

“The third quarter of 2016 highlights the tough retail market in which we have operated since the introduction of GST coupled with low consumer sentiment and spending.

“[However] we remain confident that continuous store expansion, refurbishment, promotional activity, improved merchandise mix and expanded in-store services will continue to deliver positive results despite the challenging headwinds.”

Brown noted that average spend per customer increased by about 4 per cent during the third quarter, compared with the same period last year.

Group revenue for the quarter totalled RM547.8 million (US$23.31 million) driven by new stores, improved merchandise mix and consumer promotion activity.

Gross profit of RM169 million improved by 5.8 per cent, mainly attributed to the 5.5 per cent revenue growth.

Selling and distribution expenses for the quarter increased by RM14.8 million or 10.4 per cent, mainly caused by new store expansion resulting in higher staff cost, rental cost, store depreciation expense and utility costs. The increase in the minimum wage caused store staff costs to rise by approximately 10 per cent in the current quarter.

The pre-tax profit of RM15.5 million decreased by RM7.0 million or 31.2 per cent, despite positive sales growth – and due to higher selling and distribution expenses caused by new store expansion and the impact of minimum wage increase.

For the nine months to September 30, the group’s revenue grew by 4.9 per cent against the corresponding nine months’ revenue.