Supermarket sector displays resilience amid economic uncertainty
Sri Lanka’s consumer market has faced significant challenges since 2023, with the supermarket sector proving to be relatively stable, bolstered by essential goods.
Despite the ongoing economic difficulties, including fluctuating inflation and a sluggish overall economy, the supermarket sector saw modest growth in the second quarter of 2024, industry sources said.
This growth was attributed to a gradual recovery in consumer spending, particularly in urban areas where demand for essential goods remained strong.
However, rural regions continued to struggle due to higher living costs and decreased purchasing power.
A report by the Trade Ministry highlighted the increased sales volumes in supermarkets, driven by rising household consumption and improved supply chain conditions.
Although the sector showed signs of resilience, there is cautious optimism, especially with the impending Presidential election on September 21. The uncertainty surrounding the election has led to a cautious approach within the sector.
Retail sales have been picking up, and private credit is expected to follow in the second half of the year, provided businesses begin investing in expansion. Central Bank Governor, Nandalal Weerasinghe disclosed recently.
However, businesses are currently focused on de-leveraging after the currency crisis and renegotiating old loans at lower interest rates. This de-leveraging process is crucial for strengthening balance sheets and positioning businesses for future expansion,
The John Keells Group’s Q1 2024/25 performance review indicated that its supermarket business experienced a strong quarter, with same-store sales growing by 12 per cent, driven by increased customer footfall. However consumer discretionary spending is expected to moderate in the short term due to reduced disposable income, which could affect demand for non-essential items.
Despite these challenges, the supermarket sector is expected to remain insulated, given that essential items make up a significant portion of consumers’ shopping baskets.
Cargills PLC, which operates the Food City supermarket chain across the country, reported a 12 per cent year-on-year revenue increase for the three months ending March 31, 2024, reaching Rs. 54,403 million.
However, operating profit for the quarter decreased by 19.5 per cent year-on-year, primarily due to higher electricity tariffs, increased VAT, and the removal of the VAT exemption on locally produced dairy products.
Despite these setbacks, the company’s profit after tax increased by 4.9 per cent year-on-year, highlighting the sector’s resilience, it added. .
Sri Lanka’s economy has faced numerous challenges since 2022, including hyperinflation, severe import restrictions, and the impact of Russia’s war with Ukraine on global supply chains.
However, by 2023, many of these restrictions were lifted, and the economy began to stabilise. With inflation returning to single digits and expected to stabilise further, the retail sector is projected to experience steady growth in 2024, several leading retail traders said.
This recovery is anticipated to be driven by increased consumer spending, the revival of the tourism sector, and rising investment spending, they pointed out.
The local retail sector contributes over 30 per cent of the national GDP and 14 per cent of direct employment. As the economy continues to recover, the retail sector is expected to play a crucial role in driving growth and providing employment across the country.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!