Sheng Siong reports 2Q19 net profit rose 8 percent as number of stores rose

Sheng Siong supermarket in SingaporeSheng Siong supermarket in Singapore

Supermarket operator Sheng Siong reported Monday its second quarter net profit rose 7.6 percent on-year to S$18.4 million as revenue grew with the addition of 13 new stores.

Revenue for the quarter ended 30 June increased 11.8 percent on-year to S$238.2 million, the supermarket operator said in a filing to SGX.

Maybank KimEng had forecast revenue of S$234 million and net profit of S$18.3 million.

Offsetting revenue gains from new stores, same store sales slipped 0.3 percent, mainly on cautious consumer sentiment, likely due to uncertain economic conditions globally and locally, the supermarket operator said.

“Besides nurturing the growth of our new stores in Singapore and China, we strive to enhance our gross margin and improve cost efficiency via higher sales mix of fresh produce and more efficiency gains in the supply chain,” said CEO Lim Hock Chee.

The gross margin edged up to 27.4 percent in the second quarter from 27.3 percent in the year-ago period on an improvement in the sales mix of fresh produce and non-fresh produce, the filing said, adding selling prices were generally stable.

Administrative expenses rose 14.6 percent on-year in the quarter to S$42.60 million, mainly on higher staff costs for additional headcount to operate the new stores, depreciation from fitting out the new stores, purchases of IT equipment and higher provision for bonus for the better financial performance, the filing said.

“Moving ahead, we remain focused on widening our reach by continuously looking for suitable retail space, particularly in areas where our customers reside but we do not have a presence,” Lim said, referencing the May openings of three new shops at HDBs, or public housing estates. The move increased in May, the store count to 57.

Sheng Siong declared a dividend of 1.75 Singapore cents a share, up from 1.65 Singapore cents a share in the year-ago period.

In its outlook, Sheng Siong was cautious.

“Competition in the supermarket industry is expected to remain keen and challenging among the traditional brick and mortar operators and e-commerce platforms,” the supermarket operator said. “Local demand may be affected as consumers’ sentiments turned bearish because of the unfavorable global and local economic outlook.”

It noted it has tendered for six retail locations in HDBs and is awaiting the outcome.

For the first half, Sheng Siong reported net profit rose 6.8 percent on-year to S$37.8 million on revenue of S$489.6 million, up 11 percent on-year.

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