Sheng Siong profits fell 9.4% to $17.84m

Its administrative expenses rose amidst additional headcount for its new stores.

Sheng Siong profits dropped 9.4% YoY to $17.84m in Q3 from $19.7m a year ago, an announcement revealed. Revenue rose 8% YoY to $227.87m.

The firm revealed that administrative expenses rose by $5m YoY in Q3 amidst higher staff costs as additional headcount was required to operate the new stores. The hike in depreciation and rental increase in new stores also pushed the administrative expenses.

“We are pleased that subsequent to Q3 2018, we have opened two more new stores at Junction 10, 1 Woodlands Road and Block 573 Woodlands with retail areas of 20,370 sq ft and 10,370 sq ft respectively,” Sheng Siong group CEO Lim Hock Chee said. “Another store at Block 451 Bukit Batok with an area of 6,880 sq ft will open in November 2018, bringing our total store count to 54, excluding the store in China.”

The firm thinks that revenue at the new stores will take time to grow to its normal levels, but certain expenses like rent and basic staff crewing are fixed, regardless of revenue.

Also read: Sheng Siong H1 profits jumped 6.3% to $17.15m

“Going ahead, we remain committed to our store expansion plans in Singapore, especially in areas where we do not have a presence,” Lim explained. “In addition, we will be nurturing the growth of our new stores in Singapore and China.”

The firm acknowledges that competition in the supermarket industry is expected to remain keen amidst the increase in the number of new HDB shops and large online retailers. They added that other disruptions including weather conditions may affect supplies and may drive up the group’s input costs which will impact gross margin if the increase cannot be passed on to the customers.

“Input prices may also be affected by the adverse developments in the current threat to free trade,” they explained.