SSI can sustain 22% growth pace

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(Source: BusinessWorld | by Krista Angela M. Montealegre | June 15, 2015)

Specialty retailer SSI Group, Inc. expects to sustain the pace of expansion it had seen in the first quarter throughout the rest of 2015, helped by investments of up to P3.7 billion, the company’s president said yesterday.

“For the year, we’re looking at anywhere between 19% and 22% top line [growth], and the same as far as bottom line is concerned,” SSI President Anthony T. Huang said in a briefing after the company’s stockholders’ meeting in Makati City yesterday.

SSI’s net income went up 22% to P267 million in the January-to-March period, supported by a 19% uptick in revenues to P4 billion during the same period.

The company has allotted over P2 billion in capital expenditures this year, higher than the initial estimate of P1.5 billion, after increasing the retail space target to 21,000 square meters from 18,000 square meters, SSI Vice-President for Investor Relations Margarita A. Atienza said during the briefing.

Next year, SSI is allocating P1.7 billion to add 16,000 to 17,000 square meters of retail space, Ms. Atienza said.

“That being said even if we don’t sustain the 21,000 square meters and above as far as expansion is concerned, that doesn’t necessarily mean business is slowing down. If you look at how business has evolved, it takes two to three years for us to ramp up sales.

Therefore, the investments we made last year — the 36,000 square meters of retail space — we will only start to see the fruits of that in 2016,” Mr. Huang said.

SSI embarked on an unprecedented expansion program in the last three years that saw the company add 64,000 square meters of retail space to its portfolio, 36,000 square meters of which came on stream last year. Prior to 2012, SSI only added an average of 5,000 square meters or less to its retail space annually.

SSI added seven new brands in the first quarter to bring the company’s brand portfolio to 112 at end-March. About four of the new brands will open in the second half of the year.

Over the past several years, international brands have entered the Philippine market to take advantage of the consumption-driven economy and the young demographics, Mr. Huang said.

“The market as a whole is expanding. There is obviously going to be some sort of cannibalization. This is where the whole phenomenon of premiumization comes into play where people are trading up.”

SSI is looking to beef up its presence outside the Philippine capital, particularly in Cebu, Davao and Iloilo where mall developers are also adding leasing space.

SSI sees opportunities to grow its home furnishing and specialty food dining category that currently includes TWG and Salad Stop.

At end-March, SSI was operating 746 specialty stores with a retail footprint of 137,746 square meters.

SSI is targeting to have a network of 150 FamilyMart stores by the end of the year despite challenges experienced by its franchisees.

The company was operating 90 FamilyMart stores at end-December 2014 and that network increased to 103 as of June.

Mr. Huang said 40 to 45 of the 150 stores are owned by franchisees and 33 of these have already been approved. However, only 12 are operational since the rest are in various stages of securing their permits.

“We’re optimistic we’ll catch the 150 stores by the end of this year,” he said.

SSI is operating the FamilyMart convenience stores through its joint venture with Ayala Land, Inc. and FamilyMart Japan.

SSI shares slid 19 centavos or 1.95% to P9.57 apiece yesterday.