Sheng Siong's Q1 profit up by nearly 50% on back of 'elevated' COVID-19 demand; employees to get additional month of salary
SINGAPORE: Supermarket chain Sheng Siong on Tuesday (Apr 28) reported a near 50 per cent rise in first quarter profits following “elevated demand” that was triggered when the Government raised the DORSCON level to Orange on Feb 7.
In recognition of their efforts, Sheng Siong will give an additional month's salary to its employees.
“When the Government raised COVID-19’s DORSCON from Yellow to Orange … the first round of elevated demand was triggered. Since then demand has been elevated as more people are eating at home and probably, loading up their pantry as well,” Sheng Siong said in a media release.
First quarter net profit for Sheng Siong stood at S$29 million, a jump of 49.9 per cent. The supermarket chain also attributed the increase to a rise in gross profit from "revenue growth, better gross margin, higher other income and lower operating expenses".
Its revenue for the three months ending March grew by 30.7 per cent to S$328.7 million, with 19.7 per cent from same store sales, 9 per cent from new stores and 2 per cent from its stores in China.
Sheng Siong also reported an improvement in gross margin: 27 per cent in the first quarter of 2020 compared to 26.1 per cent in the same period in 2019.
This, it said, was mainly due to an increase in sales of house brands. However, the biggest gain came from non-fresh products due to what it described as “diversified sourcing to cope with the sudden rise in demand”.
ADDITIONAL ONE MONTH SALARY FOR STAFF
In a note to shareholders, Sheng Siong Group CEO Lim Hock Chee said he was grateful for his company's employees and suppliers who "worked hard during these periods".
The staff members, excluding directors, would be rewarded with an additional month of salary.
Mr Lim added Sheng Siong would also focus improving gross margin and cost efficiency by changing the sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain.
"Moving ahead, we remain committed to our strategy of opening supermarkets in areas where our potential customers reside but we have no presence," he said.
"We will continue with our efforts to nurture the growth of the new stores and build on the momentum of improving comparable same store sales in Singapore and China."
Mr Lim also announced that Sheng Siong will open two new HDB stores - at Tampines Street 86 and another at Sengkang West Avenue - as well as a new outlet at Potong Pasir Community Club.
NO DISRUPTION IN SUPPLY CHAIN: SHENG SIONG
Sheng Siong also said there was no major disruption in the supply chain for the first quarter of 2020.
It cited the move to increase stockholding since the end of the fourth quarter of 2019 had "prevented serious stock out situations", but heavily demanded items were "depleted immediately" after the first round of elevated demand.
While its administrative expenses increased by S$11.9 million in the first quarter of 2020, Sheng Siong explained this was because of higher staff costs from increased working hours to cope with higher volume.
Additional headcount was also hired for operations at their new stores, as well as higher provisions for bonuses due to better financial performance. Staff costs and other operating expenses relating to COVID-19 will also increase but will be defrayed by Government grants, said Sheng Siong.
While it was uncertain how long the world or Singapore's economy would take to normalise after the COVID-19 outbreak, Sheng Siong said it expected revenue to drop from the current levels as items stocked up by households are consumed.
"The group will continue to hold a higher than normal level of inventory to hedge against potential disruption in the supply chain," Sheng Siong said.