Popular grocery items cost more during pandemic, but most supplies not disrupted: Sheng Siong

PRICES of popular brands of household essentials have gone up during the coronavirus pandemic, even as the supplies of most items have remained unaffected, mainboard-listed supermarket chain Sheng Siong Group told shareholders on Friday.

It also expects variable costs such as inventory, headcount and utilities to increase with elevated demand from shoppers, although the board said that it has not made major changes to its operational structure.

“The group’s operating costs will increase, but overall net margins may be improved because of better operating leverage brought about by the higher level of demand,” it added.

The board was replying to questions from investors and the Securities Investors Association (Singapore) ahead of an electronic annual general meeting scheduled for June 22.

The deadly novel coronavirus outbreak fuelled double-digit growth for the grocery operator in the three months to March 31. The chain went on a hiring drive and paid out an extra one-month bonus to its employees as a gesture of thanks.

Most of its usual suppliers “were surprisingly not seriously disrupted” by the coronavirus situation, the board disclosed, but it added that it was able to diversify sources too.

On the prices of certain popular daily essentials that have "crept up”, it said some exceptional increases came on the back of higher logistics costs.

“Overall, we did not see any price gouging,” the board told investors.

It also disclosed that its e-commerce platform allforyou.sg contributed 1 per cent to 2 per cent of the group's revenue.

The e-commerce platform is targeted at customers in areas where the chain does not have a brick-and-mortar presence, but the board noted that this channel faces a risk from “the entry of big online players if they come into our market”.

Calling the record 10 new outlets in 2018 “exceptional”, the board also said that Sheng Siong aims to launch between three and five stores a year over the next three to five years.

It has budgeted S$5.6 million a year to fit out five new shops, and set aside another S$3 million a year for maintenance capital expenditure.

Sheng Siong shed S$0.01 or 0.65 per cent to close at S$1.54 on Friday on a cum-dividend basis.