Philippine Seven Corp., the operator of 7-Eleven convenience stores in the country, said its operations have been affected by monsoon rains in the past two weeks as sales fell by as much as 20 percent.
Lawrence de Leon, the company’s head of finance and investor relations, said the company’s sales were still higher until July, when it celebrated its annual 7-11 day.
‘However, our sales is very sensitive to bad weather conditions. The past two weeks was really rainy. So, you can see same-store sales drop as much as 20 percent (due to bad weather),’ de Leon said during the PSE STAR investor day.
‘But the good thing is you can see our stores clustering quite evenly. So, if there’s school suspension or if there’s a work suspension, you can see some recovery in residential clusters Since it’s kind of diversified when it comes to location, but still that’s not enough for growth to become positive.’
The company’s operations were also affected by the Middle East crisis, but de Leon said it was able to anticipate supply chain disruption.
‘That’s why we did forward buying exercises. More than P1 billion. That’s three months worth of supply, so that we can protect against any disruption in suppliers’ fulfillment.’
That exercise created a strain in its free cash flow, which fell to negative territory in the first half. ‘But we think that this is temporary,’ he said.
De Leon said the company is still implanting its plan of expanding its footprint in the Visayas and Mindanao.
‘And this is just not about the store itself, so you need to have the supply lines to support expansion. Currently, we now have 28 distribution centers, not only in Luzon, but also in the Visayas.’
The company, he said, has been in the Visayas in 2012, and has slowly expanded its footprint further south of the country. It has also made considerable investments in its logistics capability.
De Leon said most of the company’s shareholders believe in the potential of the local stores compared to those in emerging markets.
‘Like in Thailand, for example. Imagine the GDP [gross domestic product] per capita of Thailand compared to the Philippines, so it’s about two and a half times. But when it comes to storefront, it’s more than four times compared to us. So, they can really see the potential over the long term from Philippines 7-Eleven.’
He said the company’s investors are looking at its capacity to open stores over the next 10 years.
‘They are not looking at a 5-year horizon; they are looking at a 10-year horizon.’