Mandaluyong–(PHStocks)–Philippine Seven Corporation (PSC, PSE: SEVN), the local licensee of 7-Eleven Convenience Stores, registered a 12.9% growth in net income for the first quarter of 2015. This can be attributed to the improvement in operating margin and continued store expansion all over the country.
First quarter net profits reached PhP112.9 million from PhP100 million in 2014. This translated into earnings per share of PhP0.25, up by 12.9% compared with the preceding year’s level of PhP0.22.
The improved financial performance was largely driven by the increase in sales of all corporate and franchise-operated stores, which posted growth of 24.2% from PhP4.4 billion in Q1-2014 to PhP5.5 billion at the end of the current quarter.
PSC ended the first quarter with a total of 1,341 stores all over the country. This represents a net increase of 292 stores or 27.8 percent compared with preceding year’s level of 1,049.
The rate of earnings growth of 12.9% was slower compared to the top-line growth as a result of the increased spending attributed to expanding the logistics infrastructure of the Company. PSC has been building the capacity of its distribution center to support its expansion in the different parts of the country, including the islands in the Visayas and in Davao City.
Jose Victor Paterno, President and CEO, stated, “PSC has taken steps to protect and expand its leadership in light of increased competition, recognizing that rewards for market share are especially strong in the convenience store sector. This involves not only an increased pace of expansion in areas contested by competition, but strategic entry into new territories. The latter may be unprofitable for the first few years due to the high fixed costs of logistics, but we believe will later be rewarded with strong first mover advantages. Last year we entered Panay and built on our entry into Negros and Cebu the years prior. This year we will be entering Mindanao via Davao and Cagayan de Oro.”
For this year, the Company will be increasing its capital expenditures budget by more than fifty percent to PhP3 billion to support its accelerated store expansion strategy.