PHILIPPINE Seven Corp., the company that holds the master franchise of 7-Eleven convenience stores in the country, said its net income grew 10 percent during the first half of the year, as a result of increased sales and improved gross margins.
The company said its income for the period reached P356.6 million, compared with last year’s P323.9 million. Sales jumped by 25 percent to P12.2 billion, from last year’s P9.8 billion, partly as a result of its higher store count to 1,405 stores, with franchised stores accounting for 61 percent of the total.
“Rate of earnings growth was slower, and can be attributed to the company’s capacity-building expenditures.
“[The company] has been expanding its logistics infrastructure to support its unprecedented expansion in the 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,” the company said.
For this year, Philippine Seven will be increasing its capital-expenditures budget by more than 50 percent to P3 billion to support its accelerated store- expansion strategy. The bulk of the amount is allocated to new store openings, store renovation and warehouse expansion, it said. It will accelerate its new store openings over the medium-term at 20 percent per year to take advantage of improving economic conditions and to protect its market share as competition increases. “[The company] believes that the convenience-store sector will remain crowded over the next five years. It intends to capitalize on its first-mover advantage and economies of scale to remain the market leader,” it said.
New operators boosted the franchise’s store count to 860 franchisees from 739 a year ago. As a result, total franchise revenues went up by 17 percent to P 936.9 million.
For the period, revenue from merchandise sales, which pertains to retail sales of corporate stores and merchandise sold to franchised stores, grew by 26 percent year-to-date through June.
Gross margin improved to 24.8 percent of revenue from merchandise sales in the second quarter, from 23.6 percent during the same period in 2014. “This can be attributed to the higher discounts and rebates earned as volumes rose,” it said.
For the second quarter alone, its net income went up by almost 9 percent to P243.6 million, from last year’s P223.9 million.
It said it achieved another milestone during the second quarter by opening four 7-Eleven stores in Davao City and Cagayan de Oro and two stores in Boracay.