Puregold: Pace of Lawson expansion was too slow

PUREGOLD PRICE Club, Inc. chose to divest from the Lawson chain of convenience stores after its Japanese partner failed to deliver on its expansion program.

The Lucio L. Co-led company announced last month that it is selling its 70% stake in PG Lawson, Inc. to its partners Lawson, Inc. and Lawson Asia Pacific Pte. Ltd.

Puregold Vice- President for Investor Relations John Marson T. Hao explained that the Japanese firm was in charge of expanding Lawson’s store network in the country to 500 by 2020. As of the end of 2017, however, only 33 Lawson stores have been opened since the brand entered the Philippines in 2015.

“Tinanong namin kung gusto nilang bilhin na lang sa amin. Kasi nababagalan kami sa pace ng expansion… Di namimeet yung target, so mahirap din magbreak even ( We asked them if they wanted to buy from us. Because we found the pace of expansion slow… They couldn’t meet the target, so it was hard to break even),” Mr. Hao told BusinessWorld after the company’s annual shareholders’ meeting in Alabang last week.

Mr. Hao noted that the Lawson chain has been in the red since it started operations. The company would have needed 150 to 200 stores in order to break even.

Asked why Puregold did not pursue the expansion plan itself, Mr. Hao said that Lawson, Inc. was in charge of store management, while the listed firm was in charge of merchandising as it was more familiar with local suppliers.

For now, Mr. Hao said Puregold is not looking for new opportunities in the convenience store segment in order to focus on its core business of supermarket chains.

Puregold’s divestment from convenience stores came after the Ayala and Tantoco groups also sold its stake in the Family Mart business.

SSI Group, Inc. and Ayala Land, Inc., through its 50- 50 venture SIAL CVS Retailers, Inc., along with Japanese firms FamilyMart Co. Ltd. and ITOCHU Corp., sold 100% of Philippine FamilyMart CVS, Inc. to Dennis A. Uy- led Phoenix Petroleum Philippines, Inc. last October.

SIAL CVS operated 72 FamilyMart stores at the time of the divestment, much lower than market leader Philippine Seven Corp.’s chain of more than 2,000 7-Eleven stores in the country.

Puregold grew its net income by 5.7% to P5.84 billion in 2017, supported by a 10.6% increase in consolidated sales to P124 billion during the year.

This year, it expects a 6- 8% increase in sales as it remains cautious on the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) law on consumer spending.

The company will also be putting up 25 new Puregold supermarket stores and two S& R warehouses.