Profit surge for 7-Eleven Philippines
In this article (5)
Philippine Seven Corp, which operates the 7-Eleven Philippines network, has reported a 27.9 per cent jump in income for 2014.
Its income rose from P682.6 million in 2013 to P873.3 million (US$19.7 million) last year, according to a statement filed with the stock exchange today.
The result was powered by an aggressive store network expansion program, with a net 273 new stores opened last calendar year – a 27 per cent increase – and higher operating margin.
In 2015 PSC expects to add as many as 350 more, expanding its network to more than 1600. It will make its first foray into the southern province of Mindanao, in the cities of Cagayan de Oro and Davao.
About two-thirds of the company’s stores are franchised.
Network wide store sales rose 19.3 per cent from P17.2 billion to P20.6 billion
“PSC has taken steps to protect and expand its leadership in light of increased competition, recognising that rewards for market share are especially strong in the convenience store sector,” said PSC president and CEO Jose Victor Paterno.
“This involves not only an increased pace of expansion in areas contested by competition, but strategic entry into new territories. The latter may be unprofitable for the first few years due to the high fixed costs of logistics, but we believe will later be rewarded with strong first mover advantages.”
Paterno said the long-term growth prospects for convenience store retailing in the nation are favourable.
Philippine Seven Corporation operates the largest convenience store network in the country. It acquired the licence for 7-Eleven in the Philippines from Southland Corporation (now Seven Eleven Inc.) of Dallas, Texas in December 1982.
Questions & Answers
Q.What was the main reason for the significant increase in 7-Eleven Philippines' income last year?
What was the main reason for the significant increase in 7-Eleven Philippines' income last year?
The profit surge was driven by an aggressive expansion of its store network and an improved operating margin. A net total of 273 new stores were opened in 2014, representing a 27 per cent increase.
Q.What are Philippine Seven Corp's plans for expansion in the current year?
What are Philippine Seven Corp's plans for expansion in the current year?
The company anticipates adding as many as 350 new stores in 2015, bringing its total network to over 1600. It also plans to enter the southern province of Mindanao for the first time.
Q.Why is Philippine Seven Corp expanding into new territories despite potential initial unprofitability?
Why is Philippine Seven Corp expanding into new territories despite potential initial unprofitability?
The company believes that these strategic entries, while potentially unprofitable initially due to high logistics costs, will eventually provide strong first-mover advantages. This is part of a strategy to protect and expand its market leadership.
Q.How do franchised stores contribute to the 7-Eleven Philippines network?
How do franchised stores contribute to the 7-Eleven Philippines network?
Franchised outlets constitute approximately two-thirds of the total stores in the company's network. This indicates a significant reliance on the franchise model for its operations.