(Source: Business World | June 28, 2017)
Robinsons Retail Holdings, Inc. (RRHI) is hiking capital expenditures (capex) to ramp up the expansion of its existing formats beyond Metro Manila, as the Gokongwei-led retailer continues to pursue mergers and acquisitions to accelerate growth.
During the company’s stockholders meeting, RRHI President Robina Y. Gokongwei-Pe said the multi-format retailer is shelling out P4 billion in capex — higher than the P3.3 billion spent last year — to open around 150 new stores. The capex program excludes the budget for acquisitions.
The planned launches this year are double than the actual rollouts in 2016, translating to an annual 8-10% expansion in retail footprint. The capex will be allocated for supermarkets (36%), department stores (21%), specialty stores (13%), do-it-yourself (DIY) stores (12%), convenience stores (9%), and drugstores (9%).
RRHI continues to rationalize its store network amid intensifying competition, with the retailer opting to keep “profitable” brands that “market themselves globally.” “For fashion specialty, we’ve downsized already. We’re down to half the number of brands we used to have before,” Ms. Gokongwei-Pe said. RRHI is likewise focusing on increasing its footprint beyond Metro Manila. About half of the new stores are located outside the Philippine capital and 40% of the new floor space are situated in the Visayas and Mindanao, she said.
“Modern retail has yet to fully flourish in these under penetrated regions, but increasing purchasing power and healthy growth indicators in the south signal that expansion is likely to be sustainable,” Ms. Gokongwei-Pe said.
In a span of four years, RRHI more than tripled its total store portfolio in Visayas and Mindanao to 248 stores in 2016 from 77 retail stores in 2012. This translates into approximately 154,000 square meters (sq.m.) of additional gross floor area and more than doubling in footprint during this period.
Same-store sales growth will normalize to 2-4%, from a record 6.7% in the previous year due to the impact of election-related spending, while the company will continue exploring potential M&As to fuel growth, Ms. Gokongwei-Pe said.
Accelerating infrastructure spending and the government’s tax reform program should bolster the spending power of consumers, with the former particularly benefiting the tourism and hospitality industries, she said.
So far, online sales account for only about 1% of total sales, but this segment is expected to grow over time, the official added.
At end March, Robinsons Retail was operating a total of 1,588 stores, expanding its total gross floor area by 9.6% year on year to 1.06 million square meters. It also operated 1,927 outlets under The Generics Pharmacy. RRHI’s earnings rose 27% to P996 million in the first quarter from P785 million a year ago, on the back of its expansion program and higher same-store sales. Shares in RRHI slid 40 centavos or 0.46% to close at P87.50 apiece.