May 17, 2015

Puregold's 1Q15 net income up 11.7%YoY

In a disclosure to the Exchange, Puregold Price Club Inc (PGOLD) yesterday announced its 1Q15 net income of P1.05b, 11.7% higher than the P943m recorded in 1Q14 with net margin maintained at 5.1%. Net sales grew 12.5% to P20.69b on the back of strong same-store sales growth (SSSG) of 4.4% and the putting up of 15 new stores outside Metro Manila. The latter included two S&R stores, nine stores from the newly-acquired NE Bodega supermarket chain and four Puregold stores. The company likewise opened its first Lawson convenience store in Sta. Ana, Manila.

Our take: PGOLD’s results came in largely in-line with our estimates, with the 1Q15 net income accounting for 21% of our full year forecasts. Note that in 2014, PGOLD also earned 21% of its full year net income in 1Q14. PGOLD typically experience stronger sales during the second half of the year. We believe PGOLD’s results came in better than competitor SM retail, which saw sales growing by only 6% primarily due to its expansion and acquisitions outside Metro Manila where competition is less thus yielding a better SSSG growth.

While PGOLD reported better results, we believe the supermarket business will continue to be under pressure due to fierce competition. Moreover, the build up of its Lawson store chain will likely cause a drag on earnings for a couple years as it scales up and given the intense competitive environment in the convenience store space. – WealthSec