Stores Specialty Inc. (SSI Group Inc.), the Philippines’ largest luxury and specialty retailer, saw its first-half net income plunge 40 percent as aggressive operational cost expansion outpaced strong top-line sales growth.

Net income for the six months through June fell to ₱273 million from ₱452 million in the same period last year, according to a regulatory filing. The sharp decline occurred despite a 12 percent gain in consolidated net sales, which reached ₱15.1 billion compared to ₱13.4 billion a year earlier.

The retail group’s bottom line was severely compressed by higher operating expenses, which climbed 15.5 percent in the first half to ₱6.2 billion. Selling and distribution costs rose 13.5 percent to ₱4.9 billion, driven by surging store rentals, rising personnel expenses, higher global marketing fees, and increased transaction charges tied to higher sales volumes.

General and administrative expenses also swelled by 20 percent in the second quarter to ₱705.6 million, lifted by higher utility rates, security expenses, and professional fees.

For the second quarter, net income rebounded 44.4 percent year-on-year to ₱120 million as revenue expanded 13 percent to ₱7.5 billion.

However, analysts at brokerage firms COL Financial and Abacus Securities Corp. noted that the quarterly profit gain reflects a low comparison base from 2025, when results were severely dragged down by inventory disruptions during the company's transition to new enterprise resource planning systems (SAP and ETP).

Analysts warned that performance could remain constrained by an elevated expense profile and softer consumer spending environment.

Sales growth across product categories was led by personal care, food, and home, which surged 38 percent to ₱2.5 billion, anchored primarily by the food division. The footwear, accessories, and luggage segment gained 36 percent to ₱1.4 billion, while casual wear climbed 11 percent to ₱2.1 billion.

The core Luxury and Bridge division grew 6.8 percent to ₱4.3 billion, while fast fashion posted a modest 2.3 percent increase to ₱4.7 billion. E-commerce sales totaled ₱1.1 billion, accounting for 7.4 percent percentof total first-half revenues.

By the end of June, the Tantoco-led retailer operated 623 stores nationwide across 123,137 square meters of gross selling space. The group opened nine new stores covering 5,174 square meters during the period while permanently shuttering 14 locations totaling 6,101 square meters, including its remaining Marks & Spencer branches in May.

Adding to the bottom-line pressure, net other charges reached ₱38.9 million, swinging from net other income of ₱14.3 million last year.

The decline was driven by a 55.6 percent jump in interest expense to ₱148.6 million and an ₱8.4 million loss from an associate, offset by ₱19 million in joint venture earnings and ₱5.3 million in foreign exchange gains.