Consumer seen coming back to stores as disposable incomes improve

The consumer was seen loosening his purse strings as of late, as the consumer-related companies reported stronger top and bottom line results in the quarter ended in March this year and the trend seems continuing.
Ceylon Cold Stores PLC Chairman Krishan Balendra said the company witnessed a volume growth in the back half of the fiscal year for its beverages and frozen confectionaries, while his retail network saw increased sales and footfall in double digits, reflecting the consumer is normalising after being hit with the hottest inflationary spiral in the preceding year. 

However, both segments were impacted by the increase in the Value Added Tax (VAT), removal of the VAT exemptions, increase in taxes on imported sugar and excise duty.
The manufacturer of Elephant House-branded beverages and ice creams and operator of the Keells supermarkets reported sales of Rs.36.2 billion for the quarter ended in March 2024 and Rs.139.6 billion for the full year, up 12 percent and 11 percent, respectively.

The company reported operating profits of Rs.3.09 billion and Rs.8.16 billion, respectively for the two periods, recording growths of 108 percent and 32 percent for the year.

“The manufacturing sector recorded an increase in volumes in both the beverages and frozen confectionery categories in 2023/24, driven by improved consumer spending, particularly during the latter half of the year, as inflation began to subside,” Balendra said in his annual review.

“Despite an initial decline in overall volumes during the first quarter, there was a noteworthy resurgence in the second and third quarters, even amidst unfavourable weather conditions, where heavy rains experienced during the third quarter of the year dampened the volumes to some extent,” he added.  

The manufacturing sector alone reported revenues of Rs.9.16 billion in the January-March quarter, up 25.8 percent, as people bought more cold beverages and ice creams.  
Apart from the increasing disposable incomes, the warm weather prevailed during the period may have also helped to drive the volumes.

Meanwhile, the supermarkets saw their revenues rising by 8.4 percent year-on-year to Rs.27.86 billion in the quarter, due to the resumption of the shift towards modern trade, from general trade, while the basket sizes also increased.

The company said the same store sales rose by 12 percent in the financial year ended in March 2024, while the same store footfall growth increased to 8.9 percent in the first fiscal quarter, expanding to double-digit levels in the subsequent quarters.

The supermarket sector profitability was also helped by the lower interest rates, as it reduced their finance cost.
Ceylon Cold Stores, on a consolidated level, reported earnings of Rs.1.70 a share or Rs.1.62 billion for the quarter, up 10 percent from a year ago, while the annual profit rose by 36 percent to Rs.3.61 a share or Rs.3.43 billion.