SM Investments Seen To Benefit From A Stronger H2, A Traditionally Better Season For Retail Business

In a research report, Gilbert Lopez, Head of Research for Macquarie Capital Securities (Philippines), noted that SM Investments reported a net profit of PHP40.2 billion in the first half, reflecting a 10% year-on-year growth and a strong improvement in the second quarter.

SM's key businesses typically experience a seasonally stronger second half. I Photo: SM Investments Corporation

This performance was ahead of the brokerage firm’s forecast but in line with full-year consensus, considering that SM's key businesses typically experience a seasonally stronger second half, Lopez said.

Lopez added that "what was good" was the sequential improvement in earnings across all of SM Investments’ major businesses—retail, banking, and property. SM Retail reported a net profit of PHP4.5 billion, representing a 49% quarter-on-quarter growth.

He also highlighted the notable improvement in retail sales, indicating a recovery in consumption.

The standout segment was SM Retail's Health and Beauty, which grew by 16% year-on-year in both the second quarter and the first half.

In another research report dated August 8, Philippine Equity Partners research analyst Russ Toribio echoed this sentiment, saying that gains from the first half will likely continue, with a stronger second half ahead.

Toribio noted "a notable recovery in consumer spending on discretionary items, such as fashion and home, in the second quarter."

Fashion sales posted a 10.5% year-on-year growth in the same period, largely due to back-to-school shopping ahead of the third-quarter school openings. Sales in the home segment grew by 4.6% year-on-year in the second quarter, likely driven by warmer weather during that period.

The Philippine Statistics Authority reported that the Philippines’ headline inflation eased to 3.3% in August 2024, down from 4.4% in July 2024, bringing the national average inflation from January to August 2024 to 3.6%.

“Moderating inflation increases consumers' purchasing power, which will drive growth in retail and leisure businesses,” Toribio added.