SM Investments Corp (SM), the holding company of Philippine-based conglomerate SM Group of Companies, is merging its retail arm SM Retail Inc with related retail firms earning revenues up to $1 billion.
SM earlier disclosed that its board of directors approved the merger of SM Retail with companies operating leading local retail chains such as Ace Hardware, SM Appliance Center, Homeworld, Our Home, Toy Kingdom, Watsons, Kultura, Baby Company, Sports Station and several other specialty stores. Together they operate 1,374 outlets and in 2015 delivered total revenues of P53 billion.
SM is expected to own 77.3 per cent of the enlarged SM Retail.
The merger will complement the existing retail portfolio of SM Retail which includes 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 sq m of gross floor area across a diverse portfolio of food, household appliances, DIY, furniture, apparel, footwear, pharmaceuticals/cosmetics and specialty retailing stores. The portfolio will serve a wide range of Filipino consumer needs in both staple and discretionary goods categories and will continue to leverage extensive synergies across the SM group.
SM president Harley Sy said, the move is similar to the consolidation the company undertook in 2013 to create its large-scale, mixed-use property business.
“The merger adds greater diversity and a more extensive footprint to SM Retail’s portfolio and is consistent with our goal of simplifying our corporate structure,” Sy said. “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.”
SM’s net income increased 13 per cent in 2015, while consolidated net income stood at P28.4 billion, posting the same level in 2014. Consolidated revenues grew 7 per cent to P295.9 billion for the period.
“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,” Sy noted.
SM’s underlying earnings increase was driven by a 17 per cent growth in retail earnings, 14 per cent growth in property recurring net income and 10 per cent growth in bank net income. For 2015, banks accounted for 40 per cent of SM’s consolidated earnings, property 38 per cent and retail 22 per cent.
SM’s last trading price decreased 2.96 per cent or P25 to close at P820.