SSI Group, Inc., the Tantoco family’s holding company for its portfolio of upscale retail brands, reported at 27.8 percent drop in net income to P726.3 million for the first half of 2024 from P1 billion during the same period last year despite higher sales.

The firm said in a disclosure to the Philippine Stock Exchange that this is because gross profits continued to be weighed down by increased discounting and promotions amid a weaker demand environment as well as faster growth in operating expenses.

SSI said it generated sales of P13.2 billion during the first half of 2024, an increase of 6.8 percent as compared to P12.4 billion in the same period in 2023. For the second quarter alone, sales increased by 8.4 percent to P6.7 billion.

SSI said that, during the first half of 2024, the performance of the Group’s different categories varied, with Casual and the Others (personal care, food, and outlets) categories increasing by 12.0 percent and 22.0 percent, respectively. 

The luxury and bridge category grew by 10.4 percent, fast fashion increased by 1.3 percent, and the footwear, accessories and luggage category saw a decline in sales of 13.2 percent.

The Group’s e-commerce business generated sales of P994.1 million, which accounted for 7.5 percent of sales during the half of the year.

At the end of June 2024, the Group’s store network included 541 stores nationwide which cover a total of approximately 109,173 square meters. 

During the second quarter, the Group opened 26 stores covering 5,420 square meters and closed 19 stores with total area of 3,686 square meters. As of June 30, 2024, the Group had 94 brands in its portfolio.

The Group booked rental income of P45.8 million, an increase of 9.5 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.

For the six-month period ending June 30, 2024, the company achieved a gross profit of P5.9 billion, marking a 2.6 percent increase compared to the same period in 2023. 

However, the gross profit margin for merchandise sold in the second quarter of 2024 decreased to 45.6 percent, down from 47.7 percent in the second quarter of 2023. 

This reduction in gross profit margins is attributed to a rise in promotional activities and discounting during the first half of 2024, driven by weaker demand environment.

Operating expenses during the first half of 2024 amounted to P4.9 billion, an increase of 11.6 percent over the same period last year. As a percentage of revenues, total operating expenses were at 36.9 percent compared to 35.3 percent during the same period last year.

Selling and distribution expenses for the first half of 2024 were at P3.9 billion, an increase of 9.1 percent over the same period last year. As a percentage of revenues, S&D expenses were at 29.6 percent as compared to 29.0 percent in the first half of 2023.

“The Group's return to normalized operations following the pandemic resulted in an increase in selling and distribution expenses, primarily driven by higher rent and occupancy costs amounting to P732.3 million, depreciation expenses of P82.1 million, and credit card charges of P29.3 million. 

“Additionally, other expenses, including taxes and licenses, insurance, store repairs and maintenance, outside services, and other selling and distribution costs, collectively rose by P63.3 million,” SSI said.