Sheng Siong Group, one of Singapore’s largest supermarket chains, has reported an 18.7 per cent year on year rise in net profit for the quarter to September 30 – to $14.5 million.
It credited the result to higher revenue, improved gross margin, higher ‘other income’ and tight control over operating expenses.
Revenue increased by 7.3 per cent year on year, of which 6.2 per cent was contributed by five new stores, and 1.1 per cent by comparable same store sales from the old stores.
“Retail sales in Singapore have been unexciting, and unsurprisingly sales at supermarket remained tepid,” the company said in a statement.
Against such lacklustre demand, comparable same store sales grew by only 1.1 per cent because of:
- Contraction in the Woodlands store probably due to a weakening Malaysian Ringgit;
- Lower footfalls at the store in Loyang Point which was inconvenienced by ongoing renovation works in the vicinity;
- A drastic fall in the sale of liquor at the store in Geylang after the imposition of new restrictions on the sale of alcohol; and
- Lower sales in some of the older stores.
“However, these contractions were offset by healthy growth in some of the other stores, which were either opened in 2011 and 2012, or renovated in the last three years. Growth was also restored in the Bedok Central store now that renovation works in the vicinity is completed.”
Gross margin was stable and increased marginally to 24.3 per cent compared with 24.2 per cent in the same quarter last year, despite keener competition arising from SG 50 celebrations and cautious spending because of the general economic uncertainties.
Looking ahead, Sheng Siong said competition in the supermarket industry is expected to remain keen and with the uncertain economic conditions, consumers will continue to be even more cost conscious.
“The restriction on the hiring of foreign workers is unlikely to be eased and the group expects pressure on manpower cost to continue.
“Weather conditions may affect the supply of fresh which may drive up the group’s input costs. Electricity tariffs have been lowered because of lower oil prices and this would continue to benefit the group.”
Sheng Siong has signed a lease with the Housing Development Board for a new 316 sqm store at Dawson Rd and this new store should be operational in November. The store at Block 506 Tampines could be expanded to approximately 1858 sqm by the end of next year when most of the leases with the existing tenants would have expired, allowing the group to proceed with re-configuring the retail layout.
The store at Block 258 Loyang Point with an area of approximately 560 sqm will be closed in the second quarter of 2016 as the HDB is renovating the complex. The store is expected to reopen in the third quarter of 2017 when the renovation is completed, with a larger area of about 745 sqm.
“The group is still looking for suitable retail space particularly in areas where the group does not have a presence. However, competition for retail space is expected to remain keen.”
