7-Eleven Philippines

Philippine Seven profits up 15.4% in 2015

PHILIPPINE Seven Corp. (PSC), the local licensee of the 7-Eleven convenience stores, saw its profit for 2015 grow by 15.4% on the back of higher retail sales and nationwide store network expansion.

The company’s net income reached P1.01 billion last year from P873.3 million in 2014, according to a statement released on Friday.

“The improved financial performance was largely driven by the increase in sales of all corporate and franchise-operated stores, which grew by 25.3% to P25.8 billion from P20.6 billion in 2014,” PSC said.

The company grew its store count by a quarter, ending the year with 1,602 stores nationwide, including newly built ones in Mindanao, which it penetrated in the second quarter through Davao City and Cagayan de Oro. Nationwide, there were 337 new stores against 17 closures.

“PSC has been expanding its logistics infrastructure to support its unprecedented expansion in Visayas and Mindanao. This will impact profitability in the medium term, in the form of underutilized warehouses, but is expected to benefit the Company by achieving dominant position in new markets,” PSC explained.

“The rest of the country is relatively uncontested in comparison. We are virtually the only competitor with the critical mass to build out proper supply chains in areas logistically unreachable from GMA (greater Manila area),” PSC President and Chief Executive Officer Jose Victor P. Paterno said in the statement.

As of end-2015, the company had nine warehouse facilities nationwide from just four in mid-2014.

“Such supply chains come at a medium-term cost in terms of underutilized warehouses. To put such costs in perspective, operators in contiguous territories typically serve 1000 stores per DC (distribution center), though we have downscaled and adapted our model to be cost effective for smaller areas,” Mr. Paterno said.

“We wager that first movers, especially on islands that cannot sustain more than one or two warehouses, will be rewarded with unusually dominant share (at 90 stores, we have over 80% share in Cebu), and that BPO (business process outsourcing) trends will continue to drive growth in the remote urban areas of Luzon and the islands.”

This year, the company will increase its capital expenditure budget to P3.5 billion, “to support its accelerated store expansion strategy.” This compares with the P3 billion announced for 2015.

Bulk of this year’s funds is allocated to new store opening, store renovation, and equipment acquisition.

The company acquired in December 1982 from Southland Corp., now Seven Eleven, Inc. of Dallas, Texas, the license to operate 7-Eleven stores in the Philippines.

Shares in PSC jumped by P9 or 9% to end the week at P109 each. — Daphne J. Magturo

Source: http://www.bworldonline.com/content.php?section=Corporate&title=philippine-seven-profits-up-15.4-in-2015&id=125338