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New store growth the main driver behind Sheng Siong’s revenue increase - 2018 Annual Report

2020/02/04

Source: Canva

Sheng Siong Group Ltd (Sheng Siong)

Source: Sheng Siong

Established in 1985 and listed on SGX mainboard in August 2011, Sheng Siong is one of Singapore’s largest retailers with 54 outlets, as well as e-commerce services offered across the island. In November 2017, Sheng Siong opened its first overseas store in Kunming, China.

FY 2018 Financial Highlights:

Source: Sheng Siong FY 2018 Annual Report

  • Sheng Siong’s FY 2018 revenue grew by 7.4% year-on-year to SGD 890.9 million.
  • Gross profit for FY 2018 increased by 9.6% year-on-year to SGD 238.4 million, while gross margins improved slightly from 26.2% last year to 26.8% in FY 2018.
  • Administrative expenses rose by SGD 16.1 million from FY 2017 to FY 2018.
  • Overall, Sheng Siong recorded a 1.4% year-on-year increase in FY 2018 net profit to SGD 70.5 million.

Performance Drivers:

Sheng Siong’s revenue growth in FY 2018 was mainly boosted by new stores, while comparable same store sales continued to be negatively affected by weak consumer sentiments and keen competition.

Performance Drivers (Positive Factors)

  • New Store Growth

New stores continued to be the most significant source of revenue growth for Sheng Siong, contributing 10.1% to the overall revenue increase in FY 2018. Comparable same store sales contributed 1.7%, the store in China contributed 1.0%, while permanent store closures offset the growth by 5.4%.

In FY 2018, the company opened ten new stores in Singapore – spread across different Housing and Development Board (HDB) residential estates and with most of them in newly built or redeveloped neighbourhoods. This brought Sheng Siong’s total store count in Singapore to 54, and further expanded their retail area by 22.8% to 496,200 square feet.

Going forward, Sheng Siong commented that they would continue to seek out additional retail space in new and existing HDB estates, especially those with no presence yet. The company noted that since the start of 2019, six previously-occupied HDB retail spaces are now vacant and have been released for re-tender.

Further, Sheng Siong announced that a new lease for a second supermarket in Kunming, China has been signed. The company expects the store to be operational in Q3 2019.

  • Improvement to Gross Margins

Sheng Siong’s gross margins improved after the effective implementation of measures to lower input costs. The company succeeded in obtaining better buying prices, higher rebates from suppliers for special promotions, volume discounts, improvement in efficiency in the central distribution center and a higher mix of fresh versus non-fresh offerings.

Performance Drivers (Negative Factors)

  • Higher Expenses and Input Prices

Administrative expenses increased by SGD 16.1 million in FY 2018, primarily as a result of higher staff costs, rent, depreciation and utilities arising from the opening of new stores, as well as the inclusion of the new store in China. Administrative expenses as a percentage of sales was also higher (17.3% in FY 2018 compared with the 16.6% in FY 2017) as new stores require some time for their sales levels to stabilize.

Although food inflation was relatively flat in FY 2018, there were occasional weather-driven price hikes. Disruptions to the supply chain raises input prices, and may affect Sheng Siong’s gross margin if they are unable to pass the incremental costs onto the customers.

  • Comparable Same Store Sales

Sheng Siong’s comparable same store sales rose by 1.7% in FY 2018 – but if the growth in their store at Block 506 Tampines (where the retail area was expanded by 15,000 square feet to 25,000 square feet in Q2 2017) was excluded – comparable same store sales actually declined by 0.4%.


These figures are testament to the challenging macroeconomic conditions faced by Sheng Siong. The supermarket retail scene continues to be plagued by softening consumers’ sentiments and rising competition – both from the proliferation of supermarkets in new HDB estates, as well as the rising popularity of e-commerce players.

Source: Sheng Siong FY 2018 Annual Report

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