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The call was later downgraded after the briefing as they believe that costs for staff, rent and distribution are likely to weigh on net profit growth in FY2025 as SSG expands its store network. They also see limited upside potential from current valuation.
While new stores will drive top line growth, Kande and Lim are keeping an eye out on overheads.
In 1HFY2025, SSG’s revenue growth of 7.1% was largely driven by new stores (+6.4% y-o-y) while comparable same store sales were flat (+0.1% y-o-y). “We think the impact of an earlier Chinese New Year broadly offset greater customer demand from May’s CDC voucher disbursement,” say the analysts.
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Management noted there was good sales uptick from the SG60 voucher paid out in Jul 2025 and valid till Dec 2026. SSG added seven stores ytd, with one more store on track to open in August. “We forecast 10 store additions for SSG in 2025,” say the analysts.
“However, higher staff count of 3,800 employees (vs. about 3,400 in early 2024) for its larger store network, and rising rental rates could weigh on SSG’s net profit growth in FY2025, in our view,” they add.
According to SSG, the tender bidding landscape for new estates has gotten more aggressive; the recent tender for Towner Road was won by a competitor due to higher rental price bid, it said. “In addition, as its current distribution centre is operating at full capacity, we think SSG will need to add delivery vehicles and/or increase reliance on third-party logistics and warehouse providers, which in turn could raise distribution costs,” say the analysts.
Meanwhile, the analysts see potential upside to gross margins, driven by higher share of fresh products and procurement efficiencies, as well as consumers’ increasing interest in house brands. They forecast FY2025/FY2026 gross margin at 31.2%/31.4%, compared to 30.5% in FY2024.
As at 10.45am, shares in SSG are trading at $2.10.
