Store expansion seen boosting RRHI recovery
GOKONGWEI-LED Robinsons Retail Holdings Inc. (RRHI) will likely stage a rebound this year on the back of aggressive store expansions across formats, Maybank Investment Banking Group said.
The supermarket and specialty retailer is expected to launch 83 stores in 2024 as well as book modest same-store sales growth (SSSG) and steady gross profit margins (GPM), the investment bank said in a report.
Maybank noted that RRHI’s preliminary guidance this year included net store additions of 100 to 120, an SSSG target of 3.0 to 5.0 percent and a 10- to 20-basis-point expansion in GPM.
Despite a “more conservative” outlook for the company due to possible delays in construction and tenant turnover, the bank said RRHI would likely grow by 12 percent and 18 percent this year and the next, respectively.
In 2023, RRHI saw unaudited earnings drop by 27.7 percent to P4.7 billion from P6.4 billion a year earlier. Net income attributable to equity holders of the parent firm fell by 29.5 percent to P4.1 billion from P5.8 billion.
The decline was attributed to foreign exchange losses, a reversal of equitized earnings in 2022 to a loss in 2023 with the derecognition of Robinsons Bank’s net income following a merger with Bank of the Philippine Islands and startup investment losses.
Maybank said it remained optimistic about the company’s growth prospects due to its “sustainable expansion and earnings growth trajectory and attractive valuations.”
RRHI currently operates close to 2,400 stores consisting of 349 supermarkets, 1,054 drugstores, 50 department stores, 230 DIY outlets, 408 convenience stores and 302 specialty stores along with more than 2,100 franchised outlets of The Generics Pharmacy.
The bank said the retailer was expected to generate a compound annual growth rate of 5.0 percent in net income for the fiscal year, anchored on a recovery of discretionary store formats.
“Balance sheet and cash generation [are] strong enough to fund expansion and potential acquisitions. We expect earnings before interest and taxes margin to settle at 4.3 percent and 4.4 percent for [2024 and 2025, respectively],” it said.
Return on equity, meanwhile, is seen improving to 6.8 percent this year “after bottoming at 4.4 percent in 2020.”
Downside factors for RRHI’s growth include stiffer retail competition, particularly in the supermarket businesses, and under-delivering on the planned expansion plan, Maybank added.
Robinsons Retail’s share price closed down 2.03 percent to P36.15 on Thursday amid a 0.29-percent dip for the benchmark Philippine Stock Exchange index.