Sheng Siong 3Q18 net profit fell 10 percent on year-earlier tax refund

Sheng Siong Supermarket in Singapore’s Little India area; taken October 2018.Sheng Siong Supermarket in Singapore’s Little India area; taken October 2018.

Supermarket operator Sheng Siong Group said on Tuesday that its net profit for the third quarter fell 9.9 percent on-year to S$17.7 million due to a year-earlier tax refund of S$2.2 million and higher administrative expenses due to new store openings.

Excluding the tax refund, third quarter net profit would have risen by 1.5 percent on-year, it said in a filing to SGX after the market close on Tuesday.

Revenue for the quarter ended 30 September rose 8.0 percent on-year to S$227.9 million, Sheng Siong said.

It noted that excluding the increased size of the Block 506 Tampines store, comparable same-store sales would have fallen 0.6 percentage points in the third quarter. The China store posted a third-quarter loss of S$400,000, but that its earnings before interest, tax, depreciation and amortization (ebitda) were positive, with revenue “growing steadily” since it opened in November 2017, it said.

Its gross profit margin for the quarter was 26.5 percent, up from 26.1 percent in the year-ago quarter, which was adjusted for reclassification of items from cost of sales to administrative expenses, it said. The rise was mainly on lower input cost due to higher suppliers’ rebates, a better sales mix of higher margin fresh versus non-fresh produce and improved efficiency at its central distribution center, it said.

Administrative expenses rose 16.6 percent on-year to S$39.01 million on the ten new stores opened in 2017 and 2018, it said, pointing to higher headcount, increased rental and higher depreciation.

For the nine-month period, net profit rose 0.4 percent on-year to S$53.1 million, or up 4.8 percent excluding the tax refund, Sheng Siong said. Revenue for the nine-month period rose 6.3 percent on-year to S$669.1 million, it said.

Outlook

Sheng Siong was cautious in its outlook.

“Consumer’s sentiment seems to have deteriorated in the last few months. Sales at supermarkets dipped in the last few months as reported in the retail sales numbers published by the Department of Statistics, Singapore. Competition was keener as more new stores were added into the market by the competition,” it said.

Sheng Siong noted an increased number of new HDB shops and large online retailers as well as competition for new store locations.

It also said that its input prices could be adversely affected by “the current threat to free trade.”

The supermarket operator has 51 outlets, as of 30 September.

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