The SM group is consolidating all its retail-related companies under SM Retail Inc. in a bid to strengthen its position as the country’s top retail conglomerate.
SM Investments Corp., the holding company of tycoon Henry Sy, said in a disclosure to the stock exchange its board of directors approved the merger of retail arm SM Retail with several related companies, including Ace Hardware, SM Appliance Center, Homeworld, Our Home, Toy Kingdom, Watsons, Kultura, Baby Company, Sports Station and other specialty stores.
“The merger adds both greater diversity and a more extensive footprint to SM Retail’s portfolio and is consistent with our goal of simplifying our corporate structure,” SM Investments president Harley Sy said.
“It is similar to the consolidation we undertook in 2013 to create our large-scale, mixed-use property business. As a result, SM Retail will be even better positioned to address the growing needs of Filipino consumers and we expect the merger to be accretive to SM Retail earnings in future years,” he said.
SM Investments said the merger would complement the existing retail portfolio of SM Retail, which included 53 SM department stores, 44 hypermarkets and 213 supermarkets as well as majority stakes in the local operations of Alfamart, Forever21, Crate & Barrel and other specialty and apparel retailers in addition to a minority stake in Uniqlo.
The combined entity will have 1,927 outlets and 2.4 million square meters of gross floor area across a diverse portfolio of food, household appliances, DIY, furniture, apparel, footwear, pharmaceuticals/cosmetics and specialty retailing stores.
SM Investments reported a net income of P28.4 billion in 2015, nearly unchanged from 2014, as revenues rose 7 percent to P295.9 billion.
SM Investments said excluding extraordinary items, recurring net income jumped 13 percent in 2015, as income from operations increased 8.5 percent to P56.9 billion from P52.5 billion in 2014.
“Our strong underlying earnings growth in 2015 was due to favorable domestic market conditions and improved efficiencies which helped us widen our margins particularly in retail and property,” SM Investments president Harley Sy said.
SM Investments is primarily engaged in banking, property and retail operations.
After the merger of retail units, SM Investments will own 77.3 percent of the enlarged SM Retail Inc.
SM Retail is one of the leading retail companies in the Philippines along with Robinsons Retail Holdings Inc. of the Gokongwei group and Puregold Price Club Inc of businessman Lucio Co.
Euromonitor International, a global market research firm, said in its January report it expected retailing in the Philippines to significantly grow alongside the continued improvement in the economy.
“The increasing disposable income of Filipinos will encourage further purchases of products within grocery and non-grocery categories. The constant exposure to various media sources and overseas travel are also expected to further increase sophistication of Filipinos, which will hasten the growth of local and foreign retail brands already present,” Euromonitor said.