Year-to-date, Sheng Siong shares have gained 10.3% while the STI is only up by 4.6%.
During the supermarket operator’s latest earnings results for the first six months ended 30 June 2022 (H1 FY2022), the Group’s revenue was down marginally by 0.7% to S$676.8 million.
However, net profit increased 2.1% year-on-year (yoy) to S$67.5 million.
Here are some key highlights for investors from Sheng Siong’s latest results for H1 FY2022.
1. Another record quarter of gross profit margin
One of the key takeaways from the Group’s latest results is the impressive track record of maintaining its profitability despite rising inflation.
Gross profit margin rose to a record of 30.2% during Q2 FY2022. Management attributed this to the continued improvement of sales mix towards higher margin categories, such as fresh food and private labels.
The key advantage that Sheng Siong has in fresh food pricing stems from its direct sourcing from overseas exporters.
It also has the ability to reduce wastage from repackaging and repricing, while it also benefits from tactical purchasing due to seasonality and dislocation in the supply chain.
The strong gross profit margin reflects the successful pricing strategy of the Group. Incremental costs are being passed on to consumers while the brand retains its perception of “value for money” as compared to supermarket and wet market peers.
2. Revenue growth normalises
The reopening of the economy has led to a contraction in revenue as grocery demand softened with less at-home dining in the post-pandemic world.
However, given the inflationary pressure and concern over a potential recession, Sheng Siong’s position to target cost-conscious customers will help to mitigate the decline.
Management has also guided that sales revenue will return to a normalised pre-pandemic level.
Comparable same store revenue in Singapore decreased 2.4% yoy but the decline was offset by the new stores that added 0.9% yoy to total revenue.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.