PSC TO CUT CAPITAL OUTLAY, SHELVE EXPANSION PLAN FOR 2020
The country’s leading convenience store chain operator, Philippine Seven Corp. (PSC), plans to halve its capital outlays this year to P2 billion from the original budget set before the coronavirus (COVID-19) pandemic.
PSC, the exclusive licensor of 7-Eleven in the Philippines, also expects to report a net loss in the second quarter, during which most parts of the country were locked down.
“April was horrible because 30 to 40 percent of stores were closed,” Jose Victor Paterno, PSC president, said in a briefing ahead of the company’s stockholders meeting on Thursday. “In April also, we gave hazard pay to get people to come out.”
Typically, hazard pay is given only by PSC to employees reporting for work when there are typhoons or other natural disasters.
“In May, we reopened stores but sales were still weak. June was still weak but we were able to open more stores and we were able to cut cost,” Paterno said.
The net loss that PSC will likely report for the second quarter, however, would be “lower than what was expected,” said Lawrence De Leon, PSC head of finance and accounting services.
In the first quarter, PSC chalked up a net profit of P104 million out of P14.1 billion sales from 2,916 stores.
About 95 percent of its stores are now open but only 10 percent are operational 24/7 in locations that have no curfew or where it is requested by the local government unit to serve the community, Paterno reported to shareholders.
PSC has broken ground for 200 new stores this year, but any further expansion has been put on hold.
“We don’t believe it’s a good time to be opening stores,” Paterno said. The company has offered a refund to franchisees which have yet to break ground but for those who really want to proceed, they are asked to justify why the upcoming store will likely do well.
Of the 5 percent of PSC’S store network that remained closed, Paterno said this was because sales were not enough to make up for operational costs.
“The situation remains to be fluid,” De Leon said, noting the reduction in PSC’S capital outlays this year to P2 billion from P4 billion.
“Our view is this will last longer than many hope,” Paterno said.
Apart from a P711-million pandemic support program for franchisees, PSC is negotiating with landlords for temporary rental relief during the lockdown period. It sent a letter to all landlords asking them to consider doing their share to help its franchisees, and warning them that it was evaluating stores for closure.
The group is likewise fine-tuning its products to give a wider and bigger assortment of goods, taking into account demand for essentials, larger sizes, and increasingly, a prioritization of value over brand.
PSC also moved to meet rising customer preference toward the use of e-money and virtual wallets. In 2019, service revenue nearly doubled due to the increase in e-wallets and bills payments.
This shift drove the frequency of customer visits as 7-Eleven stores became the preferred channels for e-money loading. PSC has vowed to continually develop its CLIQQ digital ecosystem.