Singapore supermarket operator Sheng Siong boosted net profit by 49 per cent in the March quarter as sales surged due to the Covid-19 pandemic.
Sales were up by 30.7 per cent in the quarter, or by 19.7 per cent on a same-store basis, initially due to stronger Lunar New Year sales. When Singapore’s government introduced a round of restrictions on public behaviour due to the pandemic on February 7, demand for groceries soared.
“Since then, demand has been elevated as more people are eating at home and probably loading up their pantry as well,” the company said in a statement.
Profit for the March quarter was S$29 million on sales of $328.7 million, with gross margin improving from 26.1 per cent to 27 per cent, largely due to increased sales of house brands.
The company says it is uncertain how long Singapore’s economy will take to normalise once the Covid-19 pandemic passes.
“When that happens, the group expects revenue to taper off from the current elevated levels as buffer stocks kept by households are consumed. In the meantime, the group will continue to hold a higher-than-normal level of inventory to hedge against potential disruption in the supply chain.”
The group is also wary of Covid-19’s effect on the supply chain, with some international food companies warning of future disruptions and an increase in the price of some goods due to the now worldwide lockdown.
Sheng Siong CEO Lim Hock Chee says the company remains committed to a strategy of opening supermarkets in areas where potential customers reside but where it has no presence yet.
“We will continue with our efforts to nurture the growth of the new stores and build on the momentum of improving comparable same store sales in Singapore and China, while focusing on improving gross margin and cost efficiency by changing the sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain,” he said.
Since March 31, the company has secured two new HDB stores in Singapore which were tendered in January – at Block 872C Tampines Street 86 (8490sqft) and Block 455 Sengkang West Avenue (9040sqft). It also won a tender for a 4610sqft shop in the Potong Pasir Community Club at 6 Potong Pasir Ave 2.
Sheng Siong will open five stores this year taking its network to 64 and its combined retailing area to 575,160sqft.