Sheng Siong's profits jumped 5.9% to $19.36m in Q1

Growth was boosted by its 10 new stores.

Supermarket chain Sheng Siong Group started 2019 on a high note after its profits edged up 5.9% YoY to $19.36m in Q1 from $18.28m, an announcement revealed. Revenue for the quarter also jumped 10.1% YoY to $251.44m from $228.28m in 2018.

The strong performance was attributed to a 9.6% YoY increase in gross profit arising mainly from higher revenue, but was offset by higher operating expenses from its six new stores which opened between April and December 2018.

Revenue growth was due to its 10 new stores. However, this was also offset by comparable same store sales (SSS) which shrank by 1ppt due to cautious consumers’ sentiment and the opening of new supermarkets in the vicinity of some of Sheng Siong’s existing stores.

“As the group opened the highest number of new stores in 2018, some of the shrinkages were expected and consistent with the thinking of catching the shifting demographics within new or redeveloped Housing and Development Board (HDB) estates,” the firm noted. Compared with Q4 2018 where comparable SSS contracted by 2.7 ppt, the contraction of 1 ppt in Q1 2019 was considered a marked improvement.

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Sheng Siong further noted that the adoption of the new accounting standard with effect from 1 January 2019, had a negative impact of $200,000 on profits, whilst the subsidiary in China which began operations in November 2017 broke even in Q1 2019.

Distributable income also rose 6% YoY from $18.34m to $19.45m, whilst earnings per share grew 4.9% YoY to $0.0129 from $0.0122. The group’s balance sheet also remained healthy with cash of $86.3m as at 31 March 2019.

With the industry expected to remain competitive, Sheng Siong noted that gross margin could be affected if input cost is increased because of food inflation, which could be caused by disruption to the supply chain or changes to prices caused by nations imposing trade tariffs.

That said, CEO Lim Hock Chee revealed that Sheng Siong has secured three new HDB shops at Bukit Batok Block 292 (4,850 sqft), Anchorvale Road Block 351 (5,400 sqft) and Sumang Lane Block 231 (5,530 sqft). These three new stores are expected to be operational before end-May 2019.

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“These stores were part of the batch of six stores which were released by HDB in a recent re-tendering exercise. The group will continue to look for retail space in areas to serve unreached and new customers, but will continue to bid, in a rational manner for new HDB shops,” the firm added.

Meanwhile, its subsidiary in China will be opening their second supermarket in Kunming in the H2 2019, and will continue to promote and build the “Sheng Siong” brand in Kunming, China.