Screengrab from https://ssigroup.com.ph/
Specialty retailer SSI Group Inc. is set to continue streamlining its store network to boost profitability but expects to complete this rationalization program this year.
SSI is expected to reduce its selling area by around 6.8 percent this year to 129,352 square meters (sqms).
“There are a few more stores this year that are due for the rationalization program. We’re just spreading it out as far as scheduling is concerned,” SSI president Anthony Huang said in an interview after the retailer’s stockholders meeting on Thursday. “But yes, we should finish that this year. There’s not much left this year.”
According to Margarita Atienza, SSI vice president for investor relations, around 12,000 sqms of selling space will be closed this year while 2,500 sqms will be opened in other locations. This suggests a net reduction of 9,500 sqms, in turn representing a 6.8-percent reduction in footprint from 138,852 sqms at end-2016.
Capital expenditure of the company for 2017 is at around P500 to P600 million and will be allocated for renovations and new stores. SSI sees more opportunities for expansion in the food and beverage industry.
“(Gourmet tea house) TWG was always a pleasant enterprise, and we are pleasantly surprised with the performance of (salad retailer) Salad Stop,” Huang said.
“Right now there have been other opportunities that were presented to us that we haven’t really said yes to,” he added.
For this year, SSI may launch one new foreign brand and for 2018, two new brands are in the pipeline to be introduced to the local market.
“In reality, this rationalization program is something we (are) always used to do. Every year, we acquire new brands, every year we would delist brands. Every year, we would open new stores, every year we would close stores depending on the performance. And that’s why we have the ability to get in and out – that’s the way our business is modelled – if and when we have to,” Huang said.
For the first time ever since conducting its initial public offering in 2014, the company enjoys positive cash flow and a double-digit growth of its brands, Huang said, adding that the implementation of the consolidation program thus appeared successful. SSI is expecting an increase in operating margin from 2017 onwards.
Huang also shrugged off the impact of the closure of a number of US retailers. “Majority or almost all of the brands we represent here in the Philippines are brands that have operations worldwide or internationally. So while some of the brands that we may have closed stores in the US as part of their rationalization program – considering the rise of e-commerce there – they are still thriving well internationally, so our businesses have remained unaffected.”
As of end-March, SSI’s store network consisted of 686 stores covering 136,665 sqms. During the quarter, the group opened five new stores covering 318 sqms but closed 27 stores covering 2,505 sqms so far. Its portfolio consisted of 114 brands. No new brand was added or discontinued during the quarter.
In 2016, SSI reduced its store network by 10.6 percent to 708 while selling area was cut down by 5.6 percent to 138,852 sqms in line with the group’s focus on improving operating efficiencies. The group closed a total of 142 stores covering 13,818 square meters last year but it opened 58 stores covering 5,525 square meters for strong brands in central locations.- ODELINNE JAN LINA