Higher revenue, improved margin lift Sheng Siong's Q3 profit by 15.4%

Shoppers at Sheng Siong supermarket in the Tanglin Halt outlet. Higher turnover and improved profit margin propelled Sheng Siong Group's third-quarter net profit 15.4 per cent higher to $12.2 million. -- PHOTO: ST FILE
Shoppers at Sheng Siong supermarket in the Tanglin Halt outlet. Higher turnover and improved profit margin propelled Sheng Siong Group's third-quarter net profit 15.4 per cent higher to $12.2 million. -- PHOTO: ST FILE

SINGAPORE - Higher turnover and improved profit margin propelled Sheng Siong Group's third-quarter net profit 15.4 per cent higher to $12.2 million.

The supermarket chain's gross and net profit margin improved by one percentage point and 0.6 percentage point respectively, to 24.2 per cent and 6.5 per cent.

Revenue for the three months to Sept 30 climbed by 4.8 per cent to $186.4 million, of which 1.4 points was contributed by eight new stores that opened in 2012, and the other 3.4 points from comparable same store sales.

The growth in comparable same store sales was driven mainly by marketing activities and was a marked improvement over the negative comparable same store sales growth of minus 2.6 per cent in the same period last year.

However, the comparable same store sales growth was lower than the 4.7 per cent achieved in the second quarter.

This was likely a result of tepid demand, as sequential growth in retail sales at supermarkets from June to August was negative, Sheng Siong noted.

Tepid demand and new stores approaching their normal rate of growth were the main reasons why new store sales growth of 1.4 per cent in the third quarter was lower than the second quarter's new store sales growth of 2.7 per cent, on a quarter-on-quarter basis.

The improvement in gross margin was driven mainly by lower input costs derived from competitive buying and more direct and bulk purchasing.

This was achieved notwithstanding food inflation and pressure on labour costs, said Sheng Siong.

Earnings per share improved to 0.86 cent from 0.76 cent previously while net asset value per share rose to 14.93 cents compared to 10.83 cents as at Dec 31.

Looking ahead, Sheng Siong aims to open new stores in areas where it does not have a presence. It expects competition for retail space, particularly in new HDB neighbourhoods to be keen.

Sourcing for retail space in mature HDB estates remains challenging and the group may consider buying shop space in choice locations if leasing is not available.

It has signed a new lease for a new store of some 4,000 square feet in an amenity centre for foreign workers in the Penjuru area. The store is likely to be operational by mid-November.

Meanwhile, the completion of the purchase of a shop space at Tampines Block 506 has been delayed, pending regulatory approvals.

Sheng Siong shares eased half a cent to 63.5 cents. The results were announced after the market closed.