+ New stores and interest income supported earnings. New stores added 3.6% points of growth to revenue. There was 1 new store added in late March this year and another is under review. Available for tendering by HDB are another 11 stores till 2024. Finance income spiked by S$2.3mn YoY in 1Q23 to S$2.7mn. SSG’s cash hoard is benefiting from higher interest rates. The cash is parked in fixed deposits.
– Lagged negative effects of inflation. Electricity expenses increased by S$2.4mn YoY in 1Q23. The new utility rates were signed at the end of last year. The total drag on earnings compared to last year can be an annualised S$10mn. Wages also experienced a S$1.5mn YoY rise in 1Q23, in part due to the progressive wage model but most of the wages are variable.
We forecast modest growth in FY23e. The negative same-store sales growth from re-opening and household dining out will filter out for the rest of the year. New stores be the main engine of revenue growth. Gross margin will be supported by increased contribution of house brands and supplier support.
China was a modest 0.4% points drag in sales in 1Q23. Sales declined due to more consumers dining out with the re-opening. The focus is on fresh products and convincing customers to shop away from the wet markets. SSG can be the one-stop shop for all their requirements. Another key focus is building up the pool of human capital to operate the stores.