Local 7-Eleven chain incurs net loss of P2.5-M in ’04

Higher expenses and finance costs weighed down on the financial performance of publicly-listed convenience store chain Philippine Seven Corp. as it incurred a net loss of P2.46 million last year, a reversal from the P9.27-million profit reported in 2003.

In a financial report filed at the Securities and Exchange Commission, Phil-Seven said its rapid expansion resulted in a decline in average sales per store of four percent compared with the previous year.

In March last year, the company acquired 35 Bingo convenience stores from Jollimart Philippines Corp. for P130 million. All but one of the Bingo stores were eventually converted to 7-Eleven outlets in the second quarter of 2004.

Phil-Seven likewise opened nine franchised stores and 22 company-owned corporate stores last year.

Total revenues from merchandise sold amounted to P32.9 billion, up 22 percent from P3.24 billion. Among the growth categories were bread, magazines, fastfood and cup drinks. Health and beauty and juice and dairy posted declines while other categories remained flat.

Also, commissions earned from prepaid services such as cellphone and Internet cards dropped 2.2 percent to P43.6 million. Although the telecom industry represented by these products continues to grow, competition among retailers has outpaced growth.

Operating expenses, meanwhile, went up to P1.34 billion from P1.07 billion due to the increase in supplies expense, inventory variation, bad merchandise and utility expense. Finance costs ballooned to P23.83 million from P8.9 million.

The largest component of operating expense, employee-related expenses, was cutdown despite a P20 daily wage hike in July. This savings is due largely to the conversion through the year of 21 company-owned stores to service agreement (SA) stores, bring the total number of SA stores to 37.

SA stores function much like a franchise. In return for a share of the gross profit, the SA store operator is responsible for all store operating expenses except for utilities, which are equally split with the company.

Despite its poor financial results, Phil-Seven maintained its leadership in the convenience store business with a total of 257 stores nationwide, accounting for a 47 percent market share.