LUCIO CO-LED companies Cosco Capital Inc. and Puregold Price Club Inc. are allocating up to P8 billion for capital expenditure next year to finance store and mall openings and land acquisitions.
Leonardo Dayao, president of Cosco and Puregold, said the group is setting aside up to P5.5 billion for Puregold’s 25 new stores programmed for next year, and P2.5 billion for Cosco’s land acquisition and construction of community malls.
“Cosco is more commercial real estate development and acquisition for malls. Puregold is part of Cosco…which will open 25 new stores next year,” Dayao said.
The P8-billion capital expenditure (capex) will be sourced from Cosco’s fundraising in 2013 and from Puregold’s internally generated cash flow from retail stores and bank lines.
For its 2015 capex, Puregold plans to spend P2.5 billion for 25 new Puregold outlets, P1.5 billion for two new S&R Membership Shopping malls set to rise next year, and P1.5 billion for possible acquisitions.
Under the Puregold umbrella, Dayao said that they have increased the expansion of S&R shops to two malls per year from one per year as “we identified that there is a much bigger market for that kind of format.”
An S&R mall will be opened on December 14 at Imus, Cavite. Dayao said that for next year, they will be building one in the Visayas Region — Bacolod or Iloilo — and another one in the Calabarzon Region — either in Batangas or Laguna. The company invests around P500 million to P700 million for an S&R outlet.
Still under Puregold, Dayao said the group is pushing back the consolidation of Co’s two Duty Free stores in Subic and Clark scheduled due to some delays in “streamlining and new IT systems.”
“We won’t be doing [the consolidation]this year. We look at middle of next year . . . We’re doing it via combined cash and share swap,” the Puregold president said.
As for listed holding firm Cosco, Dayao said the company is focusing on the acquisition of land and construction of six community malls over the next three years, amounting to P2.4 billion.
“For next year, we intend to develop three to four community malls under Cosco, plus acquisition of two existing malls” where the new community malls will be built, Dayao said.
To date, three Cosco malls are under construction in Binan, Laguna; Marikina; and Cabanatuan, Nueva Ecija.
Besides community malls, Cosco is also “interested” in looking at acquiring businesses in the hardware, pharmacy and home improvement segments aside from their newly-bought businesses — school and office supplies retailer Office Warehouse Inc. and liquefied petroleum gas (LPG) distributor Liquigaz Philippines Inc.
“Hardware, pharmacy, and home improvement. So far, we haven’t seen any potential acquisitions yet, but those are the retail lines that we think we’re interested to look at,” Dayao said.
The group is set to open 50 Lawson stores next year to be its front line in the booming convenience stores arena against its strong competitors which include Ayala Land’s FamilyMart, SM Group’s Alfamart, the Villar Group’s All Day, the Gokongwei family’s Ministop, US-based Circle K and market leader 7-Eleven.
Dayao said the roll-out of the first store will start in the first half of next year, and they are looking to close 2015 with 50 stores. They are planning to hit 500 stores in the next five years.
He said the first 200 stores within the five-year plan will be company owned, which can possibly switch to franchising after establishing the 200 stores to set a footprint of the brand in the Philippines.
“When we do franchising, the pace of the openings may be faster. We will wait until the brand has been accepted and we have more or less acquired the experience in running the convenience store chain,” Dayao said.
“Also in the case of the others, some of them are doing ready-to-eat food in-store, but we may be doing something different, like in-store cooking, and emphasize on Filipino food which will have Japanese influences. The emphasis here actually will be the pricing,” he added.
Lawson will be located in Metro Manila in its first years of establishment, mainly in central business districts and the university belt, before going outside the metro to the provinces. Opening a Lawson outlet costs around P5 million to P6 million.
Puregold posted a 13.8 percent increase in its January to September net income to P3 billion from P2.64 billion in the same period last year, while Cosco booked P4.32 billion in net income in the first nine months,16 percent higher than a year ago.
Incorporated in 1998, Puregold primarily operates hypermarkets and retail stores. Its portfolio includes hypermarket format Puregold Price Club, supermarket Puregold Junior, discounters format Puregold Extra, and high-end membership shopping S&R.
Incorporated in 1988, Cosco is the holding firm of business magnate Lucio Co and has interests in retail (Puregold Price Club Inc.), real estate (Ellimac Prime Holdings Inc. etc), liquor distribution (Premier Wine and Spirits Inc.), liquefied petroleum gas and mining.