Double-digit growth in revenues seen for supermarket chains

Carlo Lorenciana

THE rush to stockpile due to the looming enhanced community quarantine in Cebu province comes out as a bonanza for supermarkets.

It turns out the consumer sector—including convenience shops and drug stores—is emerging as the most resilient business nowadays amid the economic crisis brought by restrictions intended to stop the spread of the coronavirus disease 2019.

According to securities brokerage firm COL Financial, the buying rush represents a huge opportunity for grocery operators.

For instance, it projects a double-digit growth in revenues for supermarket chains such as Cebu’s Metro Retail Group and Gokongwei-led Robinsons Retail Holdings.

Grocery operators in Cebu have seen a huge number of shoppers flocking to stock up on food as the government tightens its measures to prevent the viral pandemic from speading.

Losers

While the grocery retailers are enjoying the surge in food demand, COL cited restaurants chains, property developers and banks as among the losers from the coronavirus pandemic-triggered economic slump.

Fast-food and restaurant operators in the country are suffering from weak demand due to store closures.

“Sales from deliveries and take-out continue, although this is only five percent to 30 percent of revenues and not all branches open. Some restaurants also highlighted inventory,” COL noted in its market research note on Covid-19’s impact on several industries in the short term.

Property companies are also reeling from mall closures, hotel closures and no new residential sales bookings.

“Office rental revenues more resilient in the short term, although could also weaken as businesses suffer from slowdown,” the brokerage firm said.

Banks may also take the brunt of slower economic growth which triggers weaker loan growth, weaker fee income, higher credit costs, provisions and non-performing loans.

For 2020, Fitch Solutions cut its economic growth forecast for the Philippines by two percentage points to four percent while Capital Economics is projecting no growth at all.

Meanwhile, under the worst-case scenario, the National Economic and Development Authority expects the country’s gross domestic product to contract by 0.6 percent this year.

“In light of the economic weakness, most listed companies will also be negatively affected,” COL said.

Aside from the economy, financial markets are performing poorly. For example, the Philippine Stock Exchnage index is down 38.9 percent for the year-to-date period, while the 10-year bond rate is now at 5.1 percent from a low of 4.1 percent earlier this year.

This would make it more difficult, according to COL, for companies to raise funds either through bond or share offerings, putting companies with large refinancing requirements at risk of suffering from a short-term liquidity crunch.