Supermarket earnings to defy wider retail slump as essential demand holds

Grocery retailers are expected to grow earnings 9% annually through 2028.

Grocery retailers are expected to maintain earnings growth through 2028 as supermarket operators benefit from sustained demand for essential goods.

An RHB report maintained a positive outlook on the sector, citing steady earnings growth, healthy cash reserves, and stable dividend payouts.

Stocks under its coverage are expected to deliver a 9% earnings compound annual growth rate from fiscal years 2025 to 2028, driven by stronger revenue and wider margins.

“Sector margins are expected to expand through economies of scale,” the brokerage said. “Store network expansion continues to be key in driving volume and revenue growth.”

Major supermarket operators such as Sheng Siong are expected to continue expanding their store networks, with the retailer saying in its first-quarter 2026 business update that it remains focused on areas where it currently has limited presence.

The company plans to open new stores at Block 336 Smith Street and Block 120 Canberra Crescent in the second quarter, followed by another outlet at 11 Rivervale Crescent in the third quarter.

The group added that results for five HDB tenders remain pending, whilst another two tenders are expected within the next six to 12 months.

Its new distribution centre in Sungei Kadut is also expected to support at least 120 stores, in line with its target of adding three stores annually over the next 10 to 15 years.

On efficiency, RHB said DFI Retail aims to reduce selling, general and administrative expenses to 1.1% of sales by 2028 through outsourcing, offshoring, and other efficiency measures.

The company is targeting FY2028 core profit of $393.2m (US$310m) to $444m (US$350m) and aims to raise online sales contribution to between 7% and 10%.

Meanwhile, grocery retailers remain relatively defensive during periods of weaker consumption because supermarkets sell essential goods and target mass-market consumers.

Recently, FairPrice Group expanded its price freeze programme from 100 to over 300 daily essentials until 31 May 2026.

RHB added that supermarket operators could benefit as consumers shift towards lower-cost retailers amidst softer economic conditions and rising living costs.

In a separate report, RHB said Singapore’s retail sector is expected to moderate in the second half of the year as global economic headwinds and the ongoing Middle East conflict weigh on sales growth.

Retail sales rose 4.8% year-on-year in March, slowing from February’s 8.3% growth, according to government data.

The growth in March was attributed mainly to a rebound in the motor vehicles segment, which recorded 12.9% year-on-year growth after a 7.8% decline in February.

However, trade-related industries such as manufacturing and wholesale trade are expected to face more pronounced pressures due to the challenging external environment.

($1 = US$0.79)