By Revin Mikhael D. Ochave, Reporter
CONSUMER-RELATED companies, such as those in retail and food and beverage (F&B) sectors, are expected to perform well in the second half of the year with higher consumer spending anticipated during the holiday season, though potential risks remain, according to market analysts.
“We are cautiously optimistic for the second half as the Bangko Sentral ng Pilipinas’ (BSP) Consumer Expectations Survey still shows some pessimism on economic conditions moving forward. This is somewhat tempered on forecasts that are leaning towards easing inflationary pressures in the following months,” AP Securities, Inc. Research Analyst Jose Antonio B. Cipres told BusinessWorld in a Viber message.
“Alongside this, the P35 wage hike which took effect last July would increase spending power and should also translate to revenues primarily to companies exposed to the F&B industry,” he added.
According to Mr. Cipres, the revenue growth for retail and F&B companies last year was driven by price increases, but noted that their margins were tempered due to higher costs.
“This year however, we are slowly starting to see all-around volume driven revenue growth and better margins on a quarter-on-quarter basis,” he said.
The BSP’s recent Consumer Expectations Survey showed that Filipino consumers are a bit more optimistic for the next 12 months, with the index growing to 13.5% from 13.4% previously.
A BusinessWorld poll of 15 analysts forecasted a median estimate of 3.7% for the country’s inflation rate in August, within the 3.2-4% forecast of the BSP. August inflation data will be released on Sept. 5.
If realized, August inflation would also be slower than the 4.4% in July and the 5.3% print in the same month a year ago.
Stephen Gabriel Y. Oliveros, research associate at China Bank Securities Corp., said in an e-mail interview that consumer-oriented companies could perform beyond expectations on the back of stronger spending and easing interest rates.
“An acceleration in growth remains a possibility in the second half given the seasonal uptick from the holiday season, and prospects of a recovery in consumer purchasing power amid easing price pressures and policy rate cuts,” he said.
“We think growth trajectories of consumer-oriented firms in the second semester will largely mirror the pace of revenue expansion we’ve seen during the first semester as first half performance generally trended within respective company guidance,” he added.
The BSP’s Monetary Board on Aug. 15 reduced its policy rate by 25 basis points (bps) to 6.25% from a near 17-year high of 6.5%, marking its first easing move in nearly four years.
BSP Governor Eli M. Remolona, Jr. has said they could cut rates by another 25 bps within the year.
Unicapital Head of Research Wendy B. Estacio-Cruz said in a separate interview that retail and F&B companies are expected to have a modest growth this year.
“We came from high levels for last year. For this year, I think it is slightly up from last year but not as much as the growth from last year,” she said.
“There will be an influx of consumer spending over the next couple of months, especially the ‘ber’ months. There’s a slight or modest growth from last year,” she added.
Mr. Cipres said that listed retailers Puregold Price Club, Inc., San Miguel Food and Beverage, Inc., Universal Robina Corp., and Robinsons Retail Holdings, Inc. will benefit from increased consumer spending during the holiday season.
“These are poised to take advantage of consumer demand during the holidays through increased sales for groceries, supermarkets, and department stores,” he said.
He added that Jollibee Foods Corp. and Alliance Global Group, Inc. (AGI), which operates McDonalds’ Philippines through Golden Arches Development Corp. (GADC), will also benefit from increased number of gatherings.
“JFC would benefit from the parties and gatherings that typically occur during holidays. While AGI would benefit given their stake in GADC; lackluster performance from their other segments would temper this,” he said.
Unicapital’s Ms. Cruz said that listed operators SM Prime Holdings, Inc. and Robinsons Land Corp. will see a surge in performance during the holiday season.
She added that listed banks will also benefit from increased consumer spending amid expected rate cuts.
“We’re also expecting banks to benefit from the lowering interest rates. There will be a lot of consumer and retail spending. There will be a lot of mortgage as well as automotive loans,” she said.
For his part, China bank Securities’ Mr. Oliveros said that listed companies Century Pacific Food, Inc. (CNPF) and Monde Nissin Corp. will see a surge this holiday season.
“CNPF’s diversified product portfolio allows the company to remain the top-of-mind producer of accessible and value-for-money goods. The company also has new legs for growth as they continue to scale their emerging businesses like milk, pet food, and alternative meat,” he said.
“Monde Nissin is expected to continue benefitting from stable demand across its core categories (noodles, baked goods), complemented by their efforts to boost brand awareness. Meanwhile, more favorable economic conditions in the United Kingdom could also aid the demand recovery for its alternative meat business,” he added.
Mr. Oliveros also said that listed telecommunication companies Globe Telecom, Inc., PLDT Inc., and Converge Information and Communications Technology Solutions, Inc. will also benefit during the holiday season.
“We like telcos given expectations of steady demand for data services, alongside accelerating earnings contributions from non-telco services. Note these factors helped support earnings growth across major listed telco players over the past few quarters,” he said.
Meanwhile, SM Prime Executive Committee Chairman Hans T. Sy said in a separate ambush interview that the company has a positive outlook for its retail and mall businesses.
“Shopping and retail are always going to always be there. We’re very positive still. It depends on how you’re going to be able to sell, whether online or on the physical side,” he said.
“What we need to do is to adapt. Instead of expecting people to go to your place to shop, you have to make it experiential for them, make it interesting for them. A place to see or a place to be seen. That’s now the evolution of shopping,” he added.