With limited growth expected in the convenience store sector domestically for the next few years, President Chain Store Corp (統一超商) said yesterday it would continue developing larger stores and its online shopping business to increase profitability.
President Chain, the operator of the nation’s largest convenience store chain, 7-Eleven, said the number of large-sized stores would likely account for at least 35 percent of its total by the end of this year, according to a client note issued by Citigroup analyst Dave Chiou (邱義昇), who attended an analysts meeting yesterday at the company’s Taipei headquarters.
Convenience store retailers usually try to boost efficiency by reducing out-of-stocks or optimizing stock-keeping units (SKUs), so an increase in store size can translate into more SKUs and provide more services, raising daily sales per store, President Chain told analysts.
As of the end of last month, around 33 percent of the retailer’s nearly 4,800 stores measured 100m2 or larger, company data shows.
President Chain has been running a virtual shopping site with Rakuten Inc, Japan’s largest Internet shopping mall operator, since 2008, with the goal of attracting 3,000 stores in three years.
“Online shopping is also a realm where management has high hopes, although meaningful contributions may not be seen in the next 2-3 years,” Chiou said in his note.
Yesterday’s meeting came just hours after President Chain posted a net income increase on Thursday night of 8.28 percent year-on-year to NT$1.74 billion (US$60.5 million) in the first quarter, or NT$1.67 earnings per share.
The company attributed the rising net income to a 40 percent profit increase in its food and retail affiliates, including President Starbucks Coffee Corp (統一星巴克), Cosmed (康是美), online retailer Books.com (博客來) and MUJI (Taiwan) Corp (無印良品).
Revenue totaled NT$28.28 billion, up 5.2 percent from a year earlier, the company said. Gross margin rose 1.1 percentage points year-on-year to 31.7 percent, thanks to higher sales of own-brand products, it said.
President Chain said it expected a high single-digit growth for domestic convenience store business and a 10 percent increase in overall bottom-line growth, according to Chiou’s note.
The company also said its total capital expenditure and investment would reach NT$5 billion this year, including about NT$3 billion for domestic store expansions and the remainder for business expansions in China.
As of this month, it has 65 7-Eleven stores in Shanghai and expects to expand to about 100 stores there by the end of the year, the company said.
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