Puregold exits convenience store sector, sells stake in Lawson

Retail magnate Lucio Co-led Puregold Price Club Inc. is bowing out of the convenience store business three years after debuting into this highly competitive segment, choosing to focus on the battleground for supermarkets.

Puregold disclosed to the Philippine Stock Exchange on Friday that it had signed an agreement to sell its 70-percent stake in PG Lawson to its Japanese partner Lawson Inc.

The divestment will “enable Puregold to rebalance its risks portfolio in the grocery retail sector and focus its resources on the further development and strengthening of the Puregold brand,” the disclosure said.

This means that Puregold seeks to allot more management time and resources to the supermarket business, where competition has likewise heated up while higher-than-expected inflation has emerged as a threat to consumer spending.

The Lawson business represents less than 10 percent of Puregold’s portfolio.

While Puregold is the second largest player in the formal grocery store business next only to SM Retail in terms of revenues, its Lawson convenience store business—set up in 2014 but officially rolled out in 2015—is still a marginal player in this segment.

As of end-2017, there were 33 Lawson convenience stores in the Philippines, mostly in Metro Manila.  On the other hand, market leaders 7-Eleven (under  Philippine Seven Corp.) and Mini-Stop (under Robinsons Retail Holdings Inc.) operated 2,350 and 500 stores, respectively.

Puregold’s exit suggests a continuing shakeout in the convenience store segment.

Last January, a consortium led by the Ayala and Tantoco groups likewise sold the 67-store FamilyMart store business to Davao-based businessman Dennis Uy’s Phoenix Petroleum.

Elsewhere in Asia, only the top two players in convenience store chains tend to be profitable due to the intensity of the logistics requirements that drive returns to scale.

This 2018, Puregold’s guidance is for sales to grow by 6-8 percent, slower than last year’s 8-10 percent, amid uncertainties on the net impact of the recent tax reform program on consumer spending.

Last year, Puregold grew its net profit by 5.7 percent to P5.84 billion, driven by a 10.6-percent growth in consolidated net sales to P124.5 billion.

As of end-2017, the group had a total of 372 stores nationwide, 309 of which were under the Puregold brand. It also operated 14 S&R membership shopping warehouse stores, 32 S&R New York Style fast-food stores, nine NE Bodega Supermarkets and eight Budgetlane Supermarkets.

This 2018, the group aims to open 25 new Puregold stores and two new S&R branches. —DORIS DUMLAO-ABADILLA