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Analysts upbeat on convenience store sector despite cautious retail sentiment


BOTH QL Resources Bhd’s (KL:QL) FamilyMart convenience store chain and 7-Eleven Malaysia Holdings Bhd (KL:SEM) saw their earnings expand in the latest quarterly financial results, in line with the 7% year on year (y-o-y) increase in the mini market, convenience store and cooperative sub-segment in the second quarter of this year, as released by Retail Group Malaysia (RGM) recently.


According to RGM’s report for September 2024, the sub-segment was the second best-performing after personal care, which rose 7.6%. Newly listed 99 Speed Mart Retail Holdings Bhd (KL:99SMART) also falls under mini market, convenience store and cooperative.


This performance is despite the overall retail sales growth in Malaysia decelerating to 0.6% during the quarter against the 7.8% expansion in 1Q2024. Sales from department stores saw the biggest drop of 13.8%, followed by furniture and furnishing, home improvement and electrical and electronics (-4.6%) and department stores and supermarkets (-3.9%). The supermarket and hypermarket sub-segment also recorded a 1.6% decline in sales.


The RGM report highlights that festive sales during Hari Raya Aidilfitri had come in below expectations, despite the weak ringgit and visa-free entry for tourists from China and India, which boosted foreign tourist numbers.


Looking ahead, a majority of members of the Malaysia Retailers Association (MRA) and the Malaysia Retail Chain Association (MRCA) expect better retail prospects for the next three months, estimating an average growth rate of 3.6% in retail sales in 3Q2024.



Similarly, analysts whom The Edge spoke to expect the earnings outlook for convenience store operators to be positive in the coming quarters, on the back of the income-boosting measures by the government, including the Employees Provident Fund (EPF) Account 3 withdrawals and civil servants’ pay hike. Other supporting factors include higher tourist arrivals, which is expected to hit 27.3 million this year with tourism receipts of RM102.7 billion.


As at June 24, a total of RM11.52 billion was transferred to Account 3 by 3.61 million Malaysians, or 27.8% of 13.01 million EPF members under the age of 55. And as at June 10, EPF approved nearly RM7 billion in withdrawals from Account 3.


The outlook for convenience store players here appears to be promising, judging by the latest quarterly results. FamilyMart saw its profit before tax (PBT) jump 77% y-o-y to RM20.5 million for the April to June quarter from RM11.59 million. On a quarter-on-quarter basis, it was up 48% from RM13.87 million previously. This brought the convenience store chain’s PBT contribution to the group to 13.4%.


During the financial year ended March 31, 2024 (FY2024), QL opened 38 new FamilyMart stores and 32 FamilyMart Mini (vending machines).


The integrated livestock farming (ILF) segment remained the largest PBT contributor at 39.6%, followed by marine product manufacturing (37.8%) and palm oil and clean energy activities (9.3%).

Overall, QL’s net profit expanded 16% y-o-y to RM107.43 million for the April to June quarter, on the back of a flat revenue of RM1.62 billion.


7-Eleven reported a 5.9% y-o-y rise in net profit to RM20.5 million for the second quarter ended June 30 (2QFY2024) from RM19.35 million a year earlier. This was driven by better revenue and lower administrative and other operating expenses. During the period, there was a net addition of 94 new stores.


On a PBT basis, 7-Eleven raked in RM30.73 million for 2QFY2024 versus RM29.23 million for 2QFY2023. Its six-month net profit grew 10.1% to RM33.33 million from RM30.27 million a year earlier, while revenue rose 3.8% to RM1.44 billion in 1HFY2024 from RM1.38 billion in 1HFY2023.


As at end-December 2023, 7-Eleven was operating 2,566 stores, comprising 2,319 classic stores and 247 7Cafés. It targets to have 2,636 stores by year end. Its focus continues to be on the expansion of the 7Café store format, especially outside of the Klang Valley. The 7Café store format will play a pivotal role in diversifying its sales mix and improving margins.


For the February to April quarter, MyNews Holdings Bhd (KL:MYNEWS) returned to the black with a net profit of RM1.73 million versus a net loss of RM6.28 million a year earlier on improved margin.

MyNews’ PBT came in at RM3.31 million during the quarter under review against a loss before tax of RM5.58 million previou