Initiative may benefit Sheng Siong supermarkets

Supermarket chain Sheng Siong Group (SSG) is expected to benefit from a Singapore Housing and Development Board (HDB) plan to revitalise shops in town and neighbourhood centres.

About S$15 million (US$10.9 million) is being directed toward this initiative annually, a measure in last week’s government budget aimed at helping revive the stagnant economy.

According to OCBC research report written by Jodie Foo, most Sheng Siong supermarkets are located in HDB blocks, and are expected to benefit from the initiative with potentially higher footfall. However, besides downtime if SSG is directly involved in community revitalisation, there is also the chance its competitors could be lured to the improved area.

SSG’s stores tend to experience slower or lower sales as a result of redevelopment projects in neighbourhoods, as well as MRT construction works for new stations. Some of these works are carried out for more than a year. Nonetheless, the stores do return to better growth after such projects are completed.

Meanwhile, in the face of stronger competition among grocery retailers, especially through marketing strategies, Foo says further initiatives to improve efficiency at SSG’s distribution centre as well as at a store level, should see steady performance continue this year.

As well as introducing hybrid self-checkout counters, SSG has adopted technology to improve the productivity of its supply chain, and Foo believes gross profit margin can be sustained at around 24 per cent.

OCBC expects SSG’s growth this year to be supported by new stores, offsetting the pressure from the expected closure of its Woodlands store by the second quarter of next year. Other store closures could also be expected next year.

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