August 18, 2014

Pure GOLD’s 1H14 net income falls 6.6% YoY

In a disclosure to the Exchange, Puregold Price Club Inc (PGOLD) disclosed 1H14 income of P1.66b, indicating a 6.6% decline YoY due to the absence of the sizable interest income recognized in the previous year coming from short-term proceeds of the P5b corporate notes issued by the company. Excluding interest income, core recurring income still would have been flat (+0.9% YoY).

Consolidated net sales grew 16.5% in 1H14 to P33.02b. Gross profit margins, on the other hand, fell by 100bps to 16.5% during the period. The company blames the decline of GPM to the lower sales volume generated from non-food items, which became expensive to the mass market due to the effect of the sin-tax law.

Our take: PGOLD continued to post weak results primarily driven by the drop in GPM which fell 100bps YoY and 90bps QoQ. While the company traced this to the impact of the implementation of the Sin Tax law, we believe this was also partly caused by intensifying competition from its peers, including SM retail’s Hypermarkets and RRHI’s Robinsons Supermarket and Ministop. With the recent entry of Family Mart into the modern retail market and RRHI’s aggressive store expansion, competition should even intensify in the retailing space. – WealthSec