Wholesale and retail

The Company

Puregold Price Club (PGOLD) was incorporated in September 1998 as a company involved in the business of trading goods such as consumer products on a wholesale and retail basis. PGOLD operates in three main formats: hypermarket, supermarkets and discounters. PGOLD also owns the S&R Membership Shopping (S&R) brand, which offers imported goods under warehouse-type retailing. It is also expanding in the convenience store segment through joint venture with Japan’s Lawson with a 70:30 split where PGOLD provides the majority of capital. As of September 2015 Puregold had 267 stores nationwide, including nine S&R stores and 13 S&R New York Style quick-service restaurants, but excluding 17 NE Bodega stores and Budgetlane supermarkets acquired in November 2015.

Development Strategy

Retailers in the country are currently in the middle of a race for space as the modern retail market in the Philippines remains under-penetrated. PGOLD is aiming for 25 new stores every year until 2019 through new store openings and acquisitions. The company recently acquired eight stores under the Budget-lane supermarket name and nine stores under the NE Bodega brand. The firm also aims to capitalise on urbanisation outside of Metro Manila and rising affluence. The firm has also seen consumption expenditure continuously grow and is looking to get a bigger market share. S&R Membership Shopping has adopted an everyday-low-price strategy in order to compete effectively in this niche with upscale grocery chains. It also aims to increase store membership and foot traffic this year.

Due to strong demand, the company has 13 S&R quick-service restaurant in different malls. This is one particular area of growth that the company is exploring. It also helps promote the S&R brand. In late 2014 the company completed a joint venture with Lawson, paving the way for PGOLD’s entry into the convenience store segment, which is currently dominated by 7-Eleven, Ministop and Family Mart. As of September 2015 the company owned 11 Lawson stores, and this is set to be increased to 50 new locations by 2016.

In terms of operations, according to figures from mid-2015, the latest available data, PGOLD had earned a consolidated net income of P2bn ($44.4m) during the six-month period ending in June 2015, which was a 21.1% increase over P1.7bn ($37.7m) for the same period in 2014. In terms of sales during the same period in 2015, the group posted consolidated net sales of P43.1bn ($956.8m), which marked 11.9% growth over P38.5bn ($854.7m) the year before. In addition, John Hao, head of investor relations at PGOLD, told local news website Rappler in late 2015 that the company had allocated P2.64bn ($58.6m) for capital expenditures in 2016, primarily for new grocery outlets and conveniences stores. Around P1bn ($22.2m) would go to building 25 new stores.

Looking Ahead

The demand for retailing remains strong and is driven by demographics in the Philippines, where population and household growth are among the fastest in Asia. The rise in affluence is evident with new jobs being created by the business process outsourcing (BPO) sector, with close to a million full-time employees, creating positive externalities. Auxiliary businesses are thriving near BPO centres, particularly food businesses and shopping centres.

Modern retailing also has a lot of room for growth. The main advantage that traditional retailers, like mom-and-pop stores and community markets, have over modern retail outlets is their lower average ticket. But with growing affluence and improving operating efficiency, it is inevitable that modern retail will increase market penetration.

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The Report: The Philippines 2016

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