7-Eleven PHL’s sales get boost from TRAIN law

PHILIPPINE Seven Corp. (PSC) saw its profits jump 20.5% in the first quarter, driven by higher sales at its network of 7-Eleven convenience stores which was attributed to the “favorable” impact of the tax reform law.

In a regulatory filing, the Philippine licensee of 7-Eleven convenience stores reported its net income rose to P190.5 million during the January to March period, from P158.1 million in the same period in 2017.

“The increase in net income can be attributed to the 12.9% growth in same store sales brought about by the favorable impact of the new Tax Reform for Acceleration and Inclusion (TRAIN) Act and the earlier timing of the Holy Week, which fell on the first quarter this year,” PSC said.

Starting Jan. 1, the TRAIN Act reduced personal income taxes for those earning below P2 million. However, the law also increased tax rates for tobacco and automobiles, among others, and imposed excise tax on sugar-sweetened beverages (SSB).

“This improved the disposable income of the middle class and contributed to the higher customer count of the stores. Moreover, the excise tax on SSB resulted into increased prices of sweetened beverages; however, there was no drastic reduction in volume seen during the first quarter,” PSC said.

The listed firm reported system-wide sales, which cover sales of corporate and franchise-operated stores, jumped 26.8% to P10.6 billion during January to March period. Revenues from merchandise sales, which are retail sales of corporate stores and merchandise sold to franchised stores, increased by 28%.

This was attributed to the 14.7% increase in the number of operating stores to end the first quarter with 2,329 stores around the country. The bulk or 1,828 of the stores were in Luzon (including 889 in Metro Manila), followed by 322 in Visayas and 179 in Mindanao. Of the total, 53% are controlled by franchisees, while the rest are corporate-owned.

“PSC continued to dominate the convenience retail sector by opening new stores all throughout the country. It capitalized on its first-mover advantage and economies of scale in widening its lead against competitors. The capacity building expenditures made in the form of establishing new distribution centers and regional headquarters are starting to produce favorable results,” the company said.

PSC is setting aside at least P3.5 billion in capital expenditures this year, as it plans to further expand its store network and renovate existing stores.