Supermarket operator Sheng Siong will reward its staff with an additional month of salary, following a 49.9 per cent jump in net profit to $29 million for the first quarter that ended on March 31, compared with a year ago.
The higher net profit comes on the back of a revenue rise, better gross margin, higher other income and a less-than-proportional increase in operating expenses relative to the increase in revenue.
Revenue went up 30.7 per cent to $328.7 million, attributed mostly to the impact of Covid-19 and better-than-expected Chinese New Year sales.
Earnings per share in Q1 was 1.91 cents, compared with 1.29 cents in the same quarter last year.
No dividend was declared this time, as was the case for the corresponding period a year ago.
However, with its strong Q1 results in the bag, Sheng Siong said that its employees, excluding directors, will be given an extra month of salary for working hard during the period of greater demand in Q1.
Demand and sales rose when the Government, responding to the pandemic, moved the country from Dorscon yellow to orange on Feb 7.
More people began having meals at home and "loading up their pantry as well", said the group.
Dorscon, or Disease Outbreak Response System Condition, indicates the severity of the coronavirus outbreak, with orange being the second-highest alert level.
Before Dorscon orange, its first quarter had kicked off with better Chinese New Year sales than a year ago because of recovering consumer sentiment and the low base effect last year, the group added.
Gross margin rose to 27 per cent in Q1 from 26.1 per cent a year ago, with the gains coming mainly from higher sales of its house brands.
The biggest gain came from non-fresh products, with sourcing having been diversified to cope with the sudden surge in demand. The ratio of fresh to non-fresh products remained about the same in Q1, compared with the same period last year.
The group also said it did not experience major disruptions in its supply chain in the first quarter.
"In hindsight, our move to increase our stockholding since the end of Q4 2019 prevented serious stock-out situations, although certain heavily demanded items were depleted immediately after the first round of elevated buying," the group said in the update.
It added that it will continue to look for retail space in areas where it does not have a presence.
Before the circuit breaker measures threw a spanner in the works, Sheng Siong was to have opened five outlets this year, bringing its network to 64 outlets and its retail area to approximately 575,160 sq ft.
The group acknowledged that competition is likely to remain keen between brick-and-mortar and online players, with some international food companies warning of future disruptions to the supply chain and a rise in prices because of the lockdowns imposed in many countries as a result of Covid-19.
When the pandemic situation normalises, the group expects revenue to taper off from the current elevated levels as buffer stocks kept by households are consumed.
"In the meantime, we will continue to hold a higher-than-normal level of inventory as a hedge against potential disruption to the supply chain," said the group.
THE BUSINESS TIMES