Grocery retailer Sheng Siong profit rose by 10.4 per cent last year on the back of new store openings.
Revenue increased 4.2 per cent for the year, with a 6.2 per cent rise contributed by new stores and 0.2 per cent by same-store-sales, offset by a reduction of 2.2 per cent arising from the temporary closure of the Loyang store.
“Comparable same store sales were affected by the tepid demand caused by the prevailing weak economic conditions,” the company said in a stock exchange filing.
The increased profit – to S$62.7 million for the year to December 31, was mainly due to higher revenue, improved gross margin and higher ‘other income’ which was partially offset by increased operating expenses relating to a higher headcount and overheads required for new stores.
The company says its gross margin increased to 25.7 per cent, from 24.7 per cent the previous year.
Looking ahead, the company says growth in the Singapore economy is expected to be between 1 per cent and 2 per cent in 2017 and it does not expect retail sales to improve spectacularly.
“Likewise, sales at supermarkets have not been exciting and going forward the group anticipates continuing lacklustre demand. Competition in the supermarket industry is expected to remain keen as consumers are expected to be more cost conscious, which may affect the group’s ability to pass on any increases in input cost in full to the customers,” said the company.
The group is still looking for suitable retail space particularly in areas where it does not yet have a presence.
“However, competition for retail space has not abated and looking for suitable retail outlets may be challenging. In addition, some smaller supermarket operators have been aggressively bidding up rent of new HDB shops in the last six months.
Development pipeline
Sheng Siong has commenced improvement works to Block 506, Tampines Central but the supermarket which is located in the building will continue to operate while work is in progress, and will have its retail area expanded by 15,000 sqft when work is completed by the end of the second quarter of 2017.
The Verge and Woodlands Checkpoint supermarkets, which were to close on April 30 and June 30 due to redevelopment by landlords, have had their trading extended to May 31 and August 31. These supermarkets contributed 8.6 per cent to the 2016 figures.
Some of the old stores in matured housing estates have seen declining same store sales and the group may earmark some of these for major refits, which could lead to a month or so of lost sales for each store.
Group CEO Lim Hock Chee said the company achieved 4.4 per cent growth in its retail area from opening new stores in 2016.
“In tandem with our dedication to reach out to our potential customers in areas where we do not have presence, we will continue to expand our retail space in Singapore. In addition, we will continue to nurture the growth of our new stores.
“To further enhance our operating margin, we will focus on increasing direct and bulk purchasing, driving for a high mix of fresh produce, increasing the range of house brand products as well as reducing overheads as a percentage of revenue,” he said.
