27 May 2020 10:42 am
Ceylon Cold Stores PLC has shelved an ambitious plan to double the number of Keells supermarkets in two years in the wake of coronavirus induced business disruptions and the financial pain it inflicted on modern retail business with social distancing becoming the new norm.
However, the company said it would re-evaluate the strategy once the operations settle. Sri Lanka’s modern trade penetration levels remain very low compared to some of its Asian peers.
CCS currently operates the country’s third largest modern trade operation with 109 retail stores under, ‘Keells’ brand after State owned Sathosa and Cargills. The firm had drawn plans to increase its number of stores to between 200 to 225 outlets by 2022/23 financial year.
Most of the Keells retail outlets are 10,000 square foot stores with ample parking space.
Sri Lanka lags well behind the East Asian peers in modern retail penetration with its share still at 16 percent. The penetration levels for Singapore is 70 percent, Malaysia 49 percent, Hong Kong 48 percent, Taiwan 43 percent and Thailand 40 percent.
Meanwhile, Sri Lanka’s modern trade density or population per store remains high at 30, 000 while the same in Singapore is 3,700, Malaysia 4,500, Hong Kong 3,400, Taiwan 1,900 and Thailand 4,700.
The regional comparison for modern trade penetration level and comparatively higher modern trade density offer a strong case for rapid expansion in the retail store footprint in Sri Lanka.
All modern trade operators in Sri Lanka faced a new reality during the two-month lockdown where people’s movement was restricted. The supermarket chains had to dust off their online platforms to serve their customers through direct-to-home delivery.
However, CCS said shift to online was inadequate to offset the loss of footfall into its outlets. Same store footfall has been growing from the second quarter before turning negative in the March quarter due to mandatory store closures.
For the financial year ended March 31, 2020, Keells Supermarkets reported earnings before interest, tax, depreciation and amortization (EBIDA) of Rs.4.3 billion compared to Rs.1.6 billion in the previous year with an encouraging growth in same store sales.
The performance was aided by both same store sales and notable contribution from new outlets, the company said.
While the same store sales have been growing by over 5 percent during both the second and the third quarters after muted growth in the first quarter marred by the Easter Sunday attacks, the same store sales grew by 5.7 percent in January and February 2020 before slowing to 1.7 percent in March due to the pandemic.
March is typically a peak sales month for retail stores.
Meanwhile, the average basket value which was mostly flat throughout the year, had a spike in the March quarter due to customers stockpiling on lockdown fears.