Gross profit rose 9% y-o-y but declined 7% q-o-q with margins up 50 basis points (bps) y-o-y. Operating profits rose only 2% Y-o-y and declined 12% q-o-q, partially offsetting gross profit improvement. This mainly stemmed from higher staff and depreciation costs which to an extent was linked to new store openings. Net profit edged up just 1% y-o-y and declined 12% y-o-y mainly owing to higher staff and depreciation and amortisation costs.
The bulk of the group’s revenue growth came from new store openings with same-store sales in Singapore and China inching up 0.1-0.6%. It opened three new stores in 2QFY2025 taking 1HFY2025 new store count to five. Sheng Siong opened two more stores in July and expects to open one more store in the third quarter.
“With three tenders pending results, we think it will comfortably open 10 new stores in 2025. Given the elevated pace of new store openings, selling and distribution expenses rose a sharp 15% y-o-y. As the new store sales ramp up in the next 12-18 months, we expect this cost to normalise and, as such, expect operating margins to improve in subsequent quarters,” says analyst Hussaini Saifee.
The way Hussaini sees it, topline momentum remains strong and likely to stay elevated as the macro remains supportive amid competitor rationalisation and limited disruption from new trends (online grocery and eating out habits).
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Sheng Siong expects Singapore consumer preference for budget-friendly supermarkets and house brand products which favours the group. “While operating margins took a hit, we think this was anticipated amid elevated new store openings and we expect it to improve going forward,” says Saifee.
As at 4.15pm, shares in Sheng Siong are trading at $2.11.
