Upscale retailer SSI Group Inc. of the Tantoco family reported a 21.1 percent drop in net income to P359.8 million in the first quarter of 2024 from the P456 million earned during the same period last year due to higher marketing expenses amid weaker demand.

In a disclosure to the Philippine Stock Exchange (PSE), the firm said it generated sales of P6.56 billion during the first three months of 2024, an increase of 5.2 percent as compared to P6.23 billion of the same period in 2023.

Sales during the first quarter of the year were impacted by the timing of the Easter holidays which occurred during the first quarter of this year and weaker spending, as more consumers traveled abroad, according to the company.

Also weighing on sales is the closure for renovation of one Zara store, and the partial closure, also for renovation, of another Zara store, as well as by delayed deliveries for one of SSI’s larger footwear brands.

Given these, during the first quarter, performance of the group’s different categories varied, with Casual and the Others (personal care, food and outlets) categories increasing by 13.4 percent and 15.6 percent, respectively. 

The luxury and bridge category grew by four percent, fast fashion increased by 3.4 percent, and the footwear, accessories and luggage category saw a decline in sales of 12.9 percent.

The group’s e-commerce business generated sales of P517.2 million, which accounted for 7.7 percent of sales during the first three months of the year.

At the end of March 2024, the group’s store network included 534 stores nationwide which cover a total of approximately 107,439 square meters. During the first quarter, the group opened 13 stores covering 1,418 square meters and closed ten stores covering 2,656 square meters.

The group booked rental income of P22.6 million, an increase of 7.4 percent over the same period last year. Rental income relates to the leasing out of certain store spaces at Central Square as well as income derived from parking spaces at Central Square.

Gross profit for the three months ended March 31, 2024 amounted to P2.9 billion, a 1.6 percent increase as compared to the same period in 2023. 

Gross profit margin for merchandise sold during the first quarter of 2024 was at 43.7 percent versus 45.3 percent during the first quarter of 2023. Lower gross profit margins reflect an increase in promotions and discounting during the first quarter, given a weaker demand environment.

Operating expenses during the first quarter of 2024 amounted to P2.4 billion, an increase of 11.5 percent over the same period last year. As a percentage of revenues, total operating expenses were at 36.9 percent compared to 34.9 percent during the same period last year.

Selling and distribution expenses for the first three months of 2024 were at P2 billion, an increase of 11.1 percent over the same period last year. As a percentage of revenues, S&D expenses were at 30.8 percent as compared to 29.1 percent in the first quarter of 2023.

The increase primarily reflects the group's return to normalized operations following the pandemic. Rent and occupancy costs rose to P708 million, while personnel costs increased to P294.6 million. 

In the efforts to boost sales, advertising expense saw a significant increase, reaching to P107.3 million.