Bright prospects expected for Puregold in 2019

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FOREIGN INVESTORS snapped up shares in Puregold Price Club, Inc., as the grocery retailer is expected to benefit from slower inflation and higher consumer spending.

The Lucio L. Co-led company was the seventh most actively traded stock from Jan. 2-4, with a total of P1.021 billion worth of 22.625 million shares exchanged, based on data from the Philippine Stock Exchange (PSE).

Puregold share price jumped to P47.2 apiece on Friday, up P2.05 or 4.54% from the previous day. It was also 9.77% higher than last year’s closing price of P43.

Aniceto K. Pangan, trader at Diversified Securities, Inc., said via mobile message that the activity last week was driven “[m]ainly [by] the entry of foreign investors particularly on blue chips such as Puregold.”

Net foreign buying for Puregold was at P42.780 million on Friday, according to PSE’s daily quotation report.

Prospects for Puregold are expected to be brighter this year, as inflation showed signs of easing. The year-on-year increase in the prices of basic goods and services slowed to 5.1% in December 2018 from the previous month’s 6%.

The latest figure was the slowest in seven months since May’s 4.6%. The rate of change in prices hit a nine-year high of 6.7% in September before easing to 6% in November.

“Despite the risk of inflation in consumer spending, Puregold’s financial performance remained resilient as reflected on its double digit growth in net sales and net income recorded for the first three quarters of 2018,” Charlene Ericka P. Reyes, officer in charge of trading and research at First Resources Management and Securities Corp. (First Resources), said via e-mail.

“With consumer staples seen to be in demand in a high inflation environment, investors are starting to price-in the expected slowdown in inflation rate for the year as this will complement the lowered income taxes with higher consumer spending,” Ms. Reyes said.

Puregold posted a net income of P4.618 billion in the first nine months of 2018, 18% higher than the P3.899 billion in 2017’s comparable period. This was driven by a 14% rise in system-wide net sales to P99.818 billion versus P87.564 billion a year ago.

The company had attributed the strong performance to sustained same store sales growth (SSSG) during the nine-month period, which stood at 5.8% for its Puregold stores and 8.8% for S&R outlets.

“After the release of its financial performance in the first nine months with consolidated net sales up by 14%, they revised upward their guidance on consolidated net sales as well as, same stores sales growth by 100% indicating the unexpected performance of the company for the first [three quarters in 2018] with sustained momentum going to the [fourth quarter],” Mr. Pangan said.

Mr. Pangan expects Puregold’s continued expansion and acquisitions will drive growth this year.

For First Resources’ Ms. Reyes, “[w]e remain optimistic that Puregold will be able to hit its guidance for 2018, with a double digit growth of 12% to 14% in consolidated net sales, and 4% to 6% in same store sales growth.” — M.M.M.Ramos