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Sheng Siong Reports an Increase in Revenue and Profits: 5 Highlights from the Retailer’s Latest Earnings

Sheng Siong Bedok
Sheng Siong Bedok

Sheng Siong Group (SGX: OV8) is a familiar name for most Singaporeans.

The supermarket operator has opened 70 outlets across the island selling a wide assortment of products such as live and chilled seafood, meat, vegetables, toiletries and essential items.

The retailer recently reported its first quarter 2024 (1Q 2024) earnings that demonstrated the continued growth of its business.

Here are five highlights from Sheng Siong’s latest financial report card.

Continued growth in revenue and net profit

For 1Q 2024, revenue grew by 5.5% year on year to S$376.2 million.

The increase came mainly from an 8% year on year boost from comparable store sales for 67 of Sheng Siong’s outlets which was offset by a 2.6% year on year decline from three new stores opened recently.

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Gross profit improved by 7.6% year on year, an increase of 0.6 percentage points, as the retailer optimised its sales mix while addressing higher staff costs and utility expenses.

Higher other income from government grants and advertisements from suppliers helped the group to report an 8.9% year on year increase in net profit to S$36.3 million.

Sheng Siong continued to maintain a clean balance sheet with S$352.3 million of cash with zero debt.

The retailer’s free cash flow also soared 149% year on year to S$34.5 million from S$13.9 million.

Higher gross and net margins

Sheng Siong managed to consistently increase its gross margin over the years as it conducted more efficient sourcing for its inventory and optimised its sales mix with the sale of more house brand items.

Gross margin grew every single year since 2020 from 27.4% to 30% in 2023.

1Q 2024 saw a continuation of this growth with gross margin coming in at 29.4%, higher than the prior year’s 28.8%.

This focus on improving its gross margin is beneficial for the business as it helps to lift net margins and results in improved free cash flow generation.

For 1Q 2024, the net margin came in at 9.7%, slightly higher than the 9.4% a year ago.

Increasing its store count

Even through the pandemic, Sheng Siong continued to steadily grow its Singapore store count.

The group ended 2019 with 59 stores and added a total of 10 new stores in the next four years to end at 69 stores by 2023.

Its total retail area increased from 529,500 square feet (sqft) to 618,300 sqft over the same period.

For 1Q 2024, Sheng Siong has hit 70 stores within its network as one more store was opened during the quarter at Block 209A Clementi Avenue 6.

The supermarket operator’s total retail area came in at 623,700 sqft as of 31 March 2024.

Although only two new stores were opened in 2023, management aims to open at least three new stores per year moving forward.

A cautious business outlook

Management maintains a cautious outlook for this year as inflation should remain elevated with GST hikes, rising public transport fares, and higher utility tariffs.

In addition, competition remains fierce within the supermarket space with competitors putting out aggressive promotions to capture market share.

Higher energy expenses are also putting pressure on margins.

To manage these risks, CEO Lim Hock Chee is committed to diversifying Sheng Siong’s supply chains and refining its sales mix to focus on higher-margin products.

Business development initiatives

Despite the above-mentioned challenges, Sheng Siong is pushing on with its expansion plans.

The group is proactive in seeking out retail space in new and existing HDB estates amid a healthy incoming supply of HDB housing.

The retailer is awaiting the outcome of four new stores that it tendered for and expects six more tenders to be put up in the remainder of this year.

Earlier this month, the group expanded the retail area of its existing store at Block 154 Bukit Batok by connecting it with a new leased space at Block 159 Bukit Batok.

Sheng Siong’s China subsidiary remains profitable, supported by five stores.

A sixth store is expected to be operational before the end of the current quarter.

The group is working on ongoing initiatives to automate work processes to bring down costs.

It also intends to increase the selection and types of house brand products to help improve its sales mix.

At the same time, Sheng Siong will ensure that it diversifies its suppliers to mitigate any potential disruptions to its business.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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