Supermarket chain Sheng Siong has reported a stronger set of results for its 1QFY2022 despite Singapore’s reopening, higher administrative costs and lower government subsidies.

Sheng Siong reported revenue of $358.0 million for the quarter, 6% up y-o-y, while net profit increased 13.9% to $35.2 million, up from the 1QFY2021 figure of $30.9 million.

In its earnings release, it explained that gross profit increased by 9.8% y-o-y to $102.7 million as gross profit margins improved by one percentage point to 28.7% in 1QFY2022, arising from a change in sales mix.

Consequently, net profit margins also increased to 9.8% in 1QFY2022, compared to 9.1% in FY2021.

However, other income fell by $0.7 million y-o-y to $3.3 million in 1QFY2022, as government grants received were reduced in pace with recovery from the pandemic.

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The percentage of other income contributed by government grants also has fallen to 30.7% in 1Q FY2022 from 46.4% in the same period a year ago.

Sheng Siong revealed that administrative expenses increased by $3 million y-o-y to $59.4 million in 1QFY2022, due to a $2.1 million increase in staff costs, as the supermarket chain gave raises to some staff in view of the tight labour market.

Moving forward, the supermarket chain expects the “elevated demand” it has seen in 2021 to further taper in 2022, given that Singapore has eased most of its Covid-19 restrictions as of Apr 26.

However, the company is aware that “although the outlook may look positive to society, it is necessary to remain cautious as these similarly optimistic views early 2021 were dampened by the new Covid-19 variants.”

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It warns that there is still a risk of supply chain disruptions arising from any new COVID-19 variants, the growing climate concern and geopolitical events.

In addition, a major concern lies with the global inflationary pressure from the supply chain disruptions and other factors.

Total inflation was recorded at 4.2% in January and February of 2022, but it may be a bright spot for Sheng Sions, as inflation is tied in deeply with the Group’s input cost and its customer’s spending.

“On the back of inflationary pressures, consumers are increasingly concerned with the higher cost of living and may choose to dine-in more at home, and look at ways to stretch their dollar. This may continue to support sales at the supermarkets,” it says.

As such, it assured shareholders that it will “redouble its efforts” in sourcing for “differentiated and reliable” supplies, as well as working with its suppliers closely to reduce disruptions. Commenting on Sheng Siong’s expansion plan, CEO Lim Hock Chee reveals that the supply of new HDB commercial space affected for various reasons in the last three years, but this is expected to improve gradually.

The supermarket chain targets to open 3 to 5 new stores per year for the next three to five years, “focusing in areas where we are not present.”

Shares of Sheng Siong closed flat at $1.53 on Apr 26.

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