Almost weekly, many of us make a trip to the nearby supermarket to get our necessities for the week or the week after. During those trips, we most likely would be thinking about the things we need to stock up on. How often, though, do we stop and think if the supermarket we visit is a viable business that we might want to own stocks in? In Singapore, there are two supermarket companies listed on our stock exchange. Let’s take a quick dive into them to learn more about their businesses, their latest financial performances and what the future holds…
Almost weekly, many of us make a trip to the nearby supermarket to get our necessities for the week or the week after. During those trips, we most likely would be thinking about the things we need to stock up on. How often, though, do we stop and think if the supermarket we visit is a viable business that we might want to own stocks in?
In Singapore, there are two supermarket companies listed on our stock exchange. Let’s take a quick dive into them to learn more about their businesses, their latest financial performances and what the future holds in store for them.
Dairy Farm International Holdings Ltd (SGX: D01)
Dairy Farm is a pan-Asian retail group with more than 7,000 outlets (including associates and joint ventures) across 11 Asian countries and territories. It operates supermarkets, hypermarkets, convenience stores, health and beauty stores, and home furnishings stores under various brands.
In Singapore, it runs supermarkets and hypermarkets such as Cold Storage, Giant, MarketPlace, and Jasons.
For the financial year ended 31 December 2017, supermarkets and hypermarkets sales came in at US$6.0 billion, falling 3% year-on-year in constant currency terms. Meanwhile, operating profit tumbled 30% to US$135 million. Dairy Farm commented that the Southeast Asian businesses suffered from “intensifying competition and changes in consumer behaviour with lower sales and significantly reduced profits”.
On a group level, total sales rose 7% to US$21.8 billion while underlying profit attributable to shareholders declined by 13% to S$403 million.
In Dairy Farm’s 2017 annual report, chairman Ben Keswick said the following regarding the group’s prospects:
“After a disappointing year in 2017 for our Food businesses in Southeast Asia, actions are being taken to improve their long-term performance. All of the Group’s other formats and markets are trading well and growth opportunities are being pursued, in mainland China and elsewhere. With our established market positions in a range of retail formats, our strong balance sheet and our determination to adapt to meet our customers’ needs, we are well placed to benefit from the growth prospects in the region.”
Sheng Siong Group Ltd (SGX: OV8)
Sheng Siong is a homegrown supermarket chain with 47 outlets located all over Singapore. Its outlets are primarily located in the heartlands of our city-state, providing customers with both “wet and dry” shopping options. This includes a wide assortment of live, fresh and chilled produce to general merchandise such as essential household products.
In 2017 (the firm has a 31 December year-end as well), Sheng Siong had a better financial performance than Dairy Farm did.
Revenue climbed from S$796.7 million to S$829.9 million, up 4.2% year-on-year. Revenue growth was due to contributions from new stores and higher same-store sales, partially offset by the temporary closure of the Loyang Point store and permanent shuttering of The Verge and Woodlands Block 6A stores.
Net profit grew 10%, from S$62.7 million a year ago to S$69.5 million in 2017.
Looking ahead, Sheng Siong said that competition in the supermarket industry in Singapore is “expected to remain keen among the traditional brick and mortar as well as the new and existing e-commerce players”. It added that “grocery retailing in physical stores will still be relevant, but could be complemented by online offerings”, and that it “will continue to source or bid to lease new stores”.
Sheng Siong’s warehouse expansion is on track and should be completed before the end of this year, adding another estimated 97,000 square feet of storage area.
In China, a new supermarket opened in November 2017 but not entirely as a number of the shops in the new shopping mall where the supermarket is located in have yet to open.
There are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge--simply click here now to claim your copy.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International Holdings Ltd and Sheng Siong Group Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.