Figaro [FCG 0.76 unch; 33% avgVol] [link] was suspended by the PSE to start the trading day for failure to submit its Annual Report before the applicable deadline. The suspension was indefinite, meaning that it would last until FCG submitted the required report. Luckily for FCG shareholders, the Liu Family’s coffee/pizza company submitted its report at noon and the suspension was lifted later that day at 1:00 PM. FCG reported a 36% increase in net income to P628 million, with systemwide sales up 27% to P5.45 billion. FCG attributed the increase in revenues to the net increase of 39 stores, pushing its total store count to 206. "Angels Pizza [sic]" accounted for 90% of the new store openings.
MB bottom-line: FCG added 39 new stores on a net basis, but it actually opened 57 stores this year. This implies that FCG closed 18 stores, but it doesn’t give any explanation that I could see for that high level of churn. That’s almost 11% of their FY23 store count that closed. Even high-performing juggernauts like Jollibee [JFC 258.00, up 1.2%; 237% avgVol] close stores for a wide variety of reasons (footprint optimization, responding to market changes, lease/property issues), but JFC only closed 225 stores in FY23 (3.6% of its total stores) while opening 658 new stores (10.6% of its total stores). FCG closed 18 stores (10.8% of its total stores) while opening 57 (34.1% of its total stores). Their closure rate is almost triple that of JFC. Sure, their growth rate is triple that of JFC, but it doesn’t automatically follow that large growth means large store death. Perhaps same-store sales data would help, but unfortunately, FCG doesn’t supply this data (or if they do, I couldn’t find it). JFC doesn’t F around with the data or make shareholders scrounge through the data scraps to craft their own insights from the gnarly ingredients they find. If I were a shareholder (I’m not), I’d applaud FCG’s growth but I’d want to get a better picture of how the management team is handling existing stores to see if there are any operational issues that are being hidden by this high level of annual growth. The company is taking on a lot of debt to finance the expansion and it doesn’t look like rate relief is coming as quickly as some may have hoped. Would it be healthy if FCG matched their FY23 rate and closed 22 stores this year?
Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.