The contribution of same-store-sales to earnings is expected to hit only 0.5% in 2019-2020.
Sheng Siong’s earnings could be dragged by a weak same-store-sales (SSS) contribution of 0.5% in FY 2019/2020 amidst continued poor spending appetite as Singapore consumers hold back on buying non-essential items, a report by Maybank Kim Eng (Maybank KE) revealed.
The firm already witnessed a SSS contraction of 1% in Q1, which it blamed on high-base effects of 2018’s Chinese New Year sales, shrinking basket values and the cannibalisation of some stores due to the location proximity of new stores. “Whilst Sheng Siong opened three new stores in May, we remain concerned about SSS weakness,” analyst Sze Jia Min said.
May’s retail sales continued to disappoint for the fourth consecutive month, slipping 2.1% YoY to $3.7b, according to data from the Department of Statistics. This contrasted with food and beverage (F&B) sales growth of 2% YoY. The supermarket and hypermarket sub-index rebounded 0.6% YoY in May after contracting 1.1% YoY in April. It was, however, down 0.8% in 5M 2019.
“Should the downtrend continue, this would be the second year of contraction for supermarket sales,” Sze noted. “We think the contrast between consumer retail and F&B sales points to Singaporeans’ increasing preference to spend on ready meals, even as they look to save for other items. We see this as an early indicator of structural changes in dining habits, which may be detrimental to supermarket sales.”
Sze added that whilst the latest Singapore consumer confidence remained unchanged QoQ, a recovery in purchasing sentiment is not expected anytime soon on the back of job security, wage growth and trade war concerns.
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