Profit lift for Sheng Siong Group
In this article (5)
Supermarket chain Sheng Siong Group had a 6.1 per cent increase in net profit to S$16.1 million (US$11.8 million) for its second quarter, to the end of June.
It attributes this to higher gross profit generated by revenue growth and improved gross margin, partially offset by higher running expenses because of increased activity.
Revenue grew by 6.8 per cent year-on-year of which 5.2 per cent was contributed by new stores, 0.9 per cent by comparable same-store sales and 0.7 per cent by Loyang Point and The Verge stores.
Growth in same-store sales improved on the first quarter’s “flattish” growth, mainly because of improved consumer sentiment, but was offset by a drop in footfall of stores in areas affected by the slowdown in the oil and gas industry, the Tampines store’s renovation and the Woodlands store, where most residents in nearby blocks affected had moved. Excluding the contraction from the Woodlands store, comparable same-store sales growth would be 1.2 and 1.7 per cent for the first and second quarters respectively.
Gross margins increased to 26.6 per cent for the second quarter (26.1 per cent in the same quarter last year), mainly because of input cost being lowered by efficiency gains derived from the central distribution centre, a higher level of supplier rebates, and a better sales mix of higher-gross-margin fresh versus non-fresh produce.
The store at The Verge was closed in the third week of June, and The Woodlands store may be closed in October instead of August, as the HDB is redeveloping the area. Both these stores accounted for 7.6 per cent of the first half’s revenue.
The group has entered into a lease for a new shop of about 4000 sqft (370 sqm) at Fajar Road, Bukit Panjang, and successfully bid for a new HDB shop of about 12,000 sqft in Woodlands Street. The stores are expected to be open in September and October respectively.
An extension of the distribution has been started, to add another 50,000 sqft of storage space in the third quarter of next year.
Renovation of a supermarket to be run by a subsidiary in Kunming is expected to be complete in September.
Questions & Answers
Q.What factors primarily contributed to Sheng Siong Group's increase in net profit for the second quarter?
What factors primarily contributed to Sheng Siong Group's increase in net profit for the second quarter?
The increase was mainly due to higher gross profit from revenue growth and an improved gross margin. However, this was partly offset by higher running expenses, resulting from increased activity within the business.
Q.How much of the revenue growth came from comparable same-store sales during this period?
How much of the revenue growth came from comparable same-store sales during this period?
Comparable same-store sales contributed 0.9 per cent to the overall revenue growth. This improvement on the first quarter's flat performance was mainly attributed to better consumer sentiment.
Q.What were the main reasons for the improved gross margins experienced by the group?
What were the main reasons for the improved gross margins experienced by the group?
Gross margins improved due to lower input costs, achieved through efficiency gains at the central distribution centre. Higher supplier rebates and a better sales mix, favouring higher-gross-margin fresh produce, also contributed.
Q.Which stores accounted for a significant portion of the group's first half revenue and are facing closure or relocation?
Which stores accounted for a significant portion of the group's first half revenue and are facing closure or relocation?
The store at The Verge, which closed in June, and The Woodlands store, which may close in October, together accounted for 7.6 per cent of the first half's revenue. Redevelopment plans by the HDB are affecting these locations.
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