7-Eleven hit by higher selling, distribution costs

PETALING JAYA: Continued network expansion and the imposition of higher minimum wage dragged down 7-Eleven Malaysia Holdings Bhd’s net profit for the fourth quarter (Q4) and for the full year ended Dec 31, 2016 (FY16).

In a filing with Bursa Malaysia, the convenience store owner and operator said net profit fell by about a third, or 32%, to RM9.52mil in Q4, as selling and distribution expenses increased by RM9mil from a year earlier.

The higher expenses were mainly caused by new store expansion, resulting in higher staff cost, rental cost, store depreciation expense and utility cost.

In addition, the company said, the increase in the minimum wage effective July 1, 2016, continued to significantly impact selling and distribution expenses.

Revenue, however, grew 5% to RM523.61mil against the corresponding period in 2015, driven by the growth in new stores, improved merchandise mix and consumer promotion activity.

“This growth was achieved despite prolonged ongoing retail market softness caused by weak consumer confidence and spending,” the retailer said.

Net profit for the financial year slid 6.5% to RM52.17mil due to a RM32.8mil jump in selling and distribution expenses, hit by the same factors that were cited for the lower Q4 profit.

7-Eleven Malaysia said its board was of the view that the trading condition for this quarter was expected to remain challenging due to continued weak consumer confidence and spending and current macro-economic conditions.

“Despite this latest development, we remain positive of holding onto our market leading position,” it said.

7-Eleven Malaysia, listed in 2014, is the country’s largest convenience store chain with about 2,000 stores nationwide. It has set a target to open 200 stores annually.