Phil Seven allots P100M for 25 new stores

Publicly-listed convenience store operator Philippine Seven Corp. is setting aside P100 million for the establishment of 25 new 7-Eleven outlets this year in line with efforts to protect its lead in the business.

At the sidelines of the company’s stockholders meeting Tuesday, Phil-Seven president Jose Victor Paterno said the new stores, which will mostly be located in Metro Manila, will bring to 280 the company’s total branch network by the end of the year.

Despite a dismal performance last year, Phil-Seven is confident of returning in the black this year on higher sales.

"The upward sales trend is expected to continue with several initiatives undertaken by the company. Proper ordering was implemented through the count and order program. The product mix was standardized through efficient central control of the shelf layout in all stores," Paterno said.

Burdened by higher expenses and finance costs, Phil-Seven incurred a net loss of P2.46 million in 2004, a reversal of the P9.27-million profit reported in 2003.

Phil-Seven said the poor performance was due to the decline in average sales per store of four percent versus the previous year.

Paterno said the company intends to arrest the decline in services by rolling out a new product called the Bills Payment program, as well as controlling costs.

Bills Payment, which is highly successful in other countries, is targeted to be fully operational across all stores this year.

Paterno said the company’s distribution facility is also expected to improve once its logistics subsidiary transfers its operations to a new state-of-the-art facility in Pasig which has the capacity to serve 600 stores by the end of 2005.

In light of the passage of the value-added-tax law, Paterno said Phil-Seven might be inclined to raise its rates to cushion the impact on its sales.

In March last year, Phil-Seven acquired 34 Bingo stores from Jollimart Philippines Corp., for P130 million. All but one of the Bingo stores were converted to 7-Eleven in the second quarter of 2004.

Phil-Seven likewise opened nine franchised stores and 22 company-owned 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 items and cup drinks. Health and beauty and juice and dairy products, on the other hand, posted a decline in sales while other categories remained flat.

Commission earned from prepaid services 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 only P1.07 billion due to 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 reduced despite a P20 wage hike in July. This savings is due largely to the conversion through the year of 21 company-owned stores to service agreement stores, bringing the total number of these stores to 37.