Upson International Corporation, a leading IT retailer in the Philippines, reported that its net income dropped 13.7 percent to P464.2 million last year as a result of lower gross margin and pre-opening cost of new branches.

In a disclosure to the Philippine Stock Exchange (PSE), the firm reported record revenues of P10 billion in 2023, higher by 5.8 percent year-over-year, fueled by revenue from new stores which have operated for less than one year. Comparable sales from existing stores increased by one percent.

By product category, computers were the primary driver of the increase led by mid-range laptops. Printing and communication also contributed positively, partly offset by decreases in sales of storage and components.

By geography, markets remained broadly stable with Visayas posting the fastest growth followed by North Mindanao.

Upson Chief Executive Officer Arlene Sy said, “2023 was a year of investment and transition, evolving from being privately held to becoming a public company.”

“For the first time in our history, revenues surpassed P10 billion as we increasingly reap the benefits from our expanding footprint. This strong foundation is what we will build on this year. Our focus is on serving our customers better to unlock the full potential of the new stores and deliver sustainable and profitable growth,” she added.

The cost of inventories sold was up 8.9 percent to P7.9 billion, resulting in a gross margin of 20.8 percent compared with 23 percent in 2022. 

The margin contraction was due to revenue mix and lower product margin rates from increased promotions, including product bundling and price discounts. 

Operating expenses were up 9.5 percent to P1.7 billion in support of the company’s strategic growth initiatives, specifically relating to store and warehouse network expansion. 

These higher expenses were mostly lease payments, contracted and other services, depreciation and amortization, and personnel-related costs. As a percentage of sales, operating expenses were slightly up from 16.2 percent to 16.7 percent in 2023.

Net income was also supported by other income, mainly through promotional support from suppliers, such as volume-based rebates and sell-out incentive programs as well as inventory price protection to drive demand and replacement cycles.

Upson opened 25 new stores in 2023, 12 of which in the fourth quarter, ending the year with 232 stores.

To broaden its product offering, Upson introduced 12 tech brands including AUKEY, ESR, Garmin, MOMAX, Verbatim, MONOCOZZI, and Cricut. It also began to set up Apple corners in select stores which brought customers greater access to the brand. 

Upson now carries 115 tech brands in its portfolio.