Sheng Siong Group Ltd), one of the major supermarket chains in Singapore, reported a 7.6% year-on-year (“yoy”) increase in net profit to S$18.4 million for the 3 months ended 30 June 2019 (“2Q2019”).
That’s mainly due to increase in gross profit arising from higher revenue, slightly improved gross margin, and higher other income but was partially offset by higher operating and net interest expense, Sheng Siong said in its report.
Revenue increased by 11.8% in 2Q2019 of which 11.3 percentage points was contributed by the 13 new stores. But that was offset by comparable same store sales which slipped by 0.3 percentage points mainly due to cautious consumers’ sentiments, probably caused by the uncertain economic conditions both globally and locally.
However, comparable same store sales improved from a contraction of 1.0 percentage points in 1Q2019 to 0.3 percentage points in 2Q2019. Revenue from the first store in Kunming China grew at a healthy pace. As the second store was just opened, contribution to the top line from this store was not significant.
Gross margin increased slightly to 27.4% in 2Q2019 compared with 27.3% in 2Q2018 mainly because of an improvement in the sales mix of fresh produce versus non-fresh produce. Selling prices were generally stable.
Competition in the supermarket industry is expected to remain keen and challenging among the traditional brick and mortar operators and e-commerce platforms. Local demand may be affected as consumers’ sentiments turned bearish because of the unfavorable global and local economic outlook.
Core inflation, more particularly food inflation has remained generally subdued but the risks of unpredictable weather or disruptions to the supply chain could increase input prices.
The Group is still looking for suitable retail spaces in areas where it does not have a presence. However, competition for new HDB shops is still keen but bidding has become more rational. In the past few months, it appeared that some of the players in the industry are re-organizing their portfolio of stores as there were some store closures, which were subsequently released by HDB for re-tendering.
On the future plans of the Group, Mr Lim Hock Chee, the Group’s Chief Executive Officer, added, “Moving ahead, we remain focused on widening our reach by continuously looking for suitable retail space, particularly in areas where our customers reside but we do not have a presence. ”
He said besides nurturing the growth of our new stores in Singapore and China, Sheng Siong strives to enhance our gross margin and improve cost efficiency via higher sales mix of fresh produce and more efficiency gains in the supply chain. To reward shareholders for their unwavering support, it declares an interim cash dividend of 1.75 cent per share.