March 24, 2015

Robinsons Retail Holdings Inc posts 18% hike in 2014 core income of P3.4b

In a briefing yesterday Robinsons Retail Holdings Inc announced net income of P3.5b and core income of P3.4b, an 18% YoY growth on the back of a 19.5% increase in revenues. Of the 19.5% revenue growth, 3.6% came from same-store sales growth while the remaining 15.9% came from new store sales. Gross profit margins increased 40bps to 21.7% from 21.3% a year earlier. EBITDA margins decreased 40bps however due to higher operating expenses.

The Supermarket segment, RRHI’s largest income contributor, posted a 19% growth in EBITDA to P2.7b. Its second biggest contributor, the department stores delivered a 7.3% increase in EBITDA to P1.1b as it shifted focus to home products and children’s wear. The DIY store segment delivered an 18.2% YoY growth in EBITDA to P911m despite margins being affected by higher freight costs due to the port congestion.

Its specialty stores segment delivered the best performance, registering a 34.5% growth in EBITDA to P533m as strong performances from Toys R Us and Daiso Japan offset weak performance from its fast fashion brands. Drug stores posted flattish growth with EBITDA relatively steady at P321m given the costs related to the 34% increase in the number of stores to 320 in 2014.

Its convenience store business EBITDA declined 17.7% to P289m from P351m previously due to increased competition although MiniStop was able to slow the decline in the second half of the year.

Our take: RRHI’s net income of P3.55b came in slightly or 2.9% ahead of consensus estimates of P3.45b. Of note however is that RRHI’s P3.55b net income for 2014 included P634m in interest income which increased sixfold YoY as the company kept a significant portion of its IPO proceeds in AFS investments.

While RRHI was able to grow gross profit margins by 40 bps, EBITDA margins actually decreased by 40bps due to higher operating expenses attributable to new store openings which increased GFA by 18% YoY. We believe that while this proved a drag to its 2014 results, RRHI should reflect the positive benefits of the store expansion as new stores ramp up operations over the next two years. – WealthSec