Sheng Siong's full-year net profit up 10.4% to $62.7m

Thanks to its new stores.

Supermarket chain Sheng Siong posted a 10.4% year-on-year (yoy) increase in net profit to $62.7m on the back of higher revenue and improved gross margin.

Revenue increased 4.2%, of which 6.2% was contributed by new stores and 0.2% by comparable same store sales from old stores, but was offset by a reduction of 2.2% arising from the temporary closure of the Loyang store.

Gross margin also grew to 25.7% compared to 24.7% in 2015, attributed to lower input prices resulting from higher rebates from suppliers.
Operating expenses, however, also increased with additions to staff headcount and expenditures for renovation and purchase of new stores and warehouse facilities.

“We are delighted to remain on track for our store expansion plans with the opening of four new stores in 2016, representing a 4.4% growth in our retail area,” said Lim Hock Chee, the group’s chief executive officer. He also added that the group has begun improvement works to the Block 506, Tampines Central store, and will soon redevelop the Verge and Woodlands Checkpoint supermarkets.

Lim said that as well as nurturing the growth of new stores, the company is also eyeing to enhance gross margin by seeking efficiency gains in the supply chain and driving for a high mix of fresh produce.

Despite further plans to expand, the company is tempering its growth outlook, citing that the sluggish economy has made consumers more cost conscious. Competition for retail space has also not abated, with smaller supermarket operators aggressively bidding up rent of new shops.

The weather has also affected vegetable and seafood prices towards the end of 2016, and further disruption to the supply chain will affect the group’s gross margin if increases cannot be passed on to the customers.