This article first appeared in The Edge Financial Daily on August 30, 2017

KUALA LUMPUR: 7-Eleven Malaysia Holdings Bhd saw a 32.7% decline in net profit to RM10.15 million in the second quarter ended June 30, 2017 (2QFY17) from RM15.07 million a year ago, dragged down by higher selling and distribution expenses.

In a filing with Bursa Malaysia yesterday, 7-Eleven Malaysia said its selling and distribution expenses increased by 17.1% year-on-year mainly due to impact of minimum wage which came into effect on July 1, 2016, new store expansion and depreciation, as well as inventory shrinkages.

“Administrative and other operating expenses for 2QFY17 also increased by 13.4%, mainly due to increase in staff cost, information technology maintenance and professional fees,” it added.

The group’s earnings per share fell to 0.91 sen in 2QFY17 from 1.27 sen in 2QFY16.

Quarterly revenue, however, was up 9.8% to RM555.21 million in 2QFY17 from RM505.7 million in 2QFY16, mainly due to the Hari Raya festive period and new store growth. There was also positive growth in existing stores.

The weaker 2Q results dragged the group’s earnings down by 41.4% to RM18.15 million for the cumulative six months (1HFY17) from RM31 million a year ago.

Nevertheless, revenue grew 4.4% to RM1.08 billion in 1HFY17 from RM1.03 billion in 1HFY16, driven by growth in new stores and Hari Raya celebration.

On prospects, 7-Eleven Malaysia is of the view that the trading conditions for the remaining period of the current financial year ending Dec 31, 2017 are expected to remain challenging.

“We expect to see continued improvements in the next two quarters by pursuing our core strategy pillars of operation excellence, cost management and commercial innovation,” it said.

In a separate statement, 7-Eleven Malaysia acting chief executive officer Ho Meng said he is confident that the group’s strategic review of the business and the implementation of its “Back to Basics” programme will strengthen and solidify 7-Eleven Malaysia as the customer’s first choice of convenience store operators.