Message of the
Chairman & President
Lance Y. Gokongwei
Chairman
To Our Stakeholders:
As we write this message, the nation is in the grip of the coronavirus disease 2019 (COVID-19) pandemic. COVID-19, a highly infective respiratory illness that may be fatal, has far-reaching implications on Philippine society, from the health and safety of the general population, to business operations across all sectors. At Robinsons Retail, we face numerous challenges on ensuring the welfare of our people and the stability of our supply chain.
Robina Gokongwei-Pe
President &
Chief Executive Office
Looking Back on 2019
Amidst growth drivers counterbalanced by macroeconomic and natural volatility, 2019 was a year of resilience for Robinsons Retail, with notable successes and challenges that required agile decision-making by management.
The Philippine retail sector was buoyed by positive foundations for sustained growth. From the labor and socio-economic standpoint, we saw stable employment at 94.7% of the labor force, and lower poverty at 16.6% in 2019. The tourism industry and overseas remittances also reached new heights. Tourism arrivals grew 14.4%, translating to an estimated revenue of Php473 billion, while OFW remittances grew by 3.9% to Php33.5 billion, as of end 2019. Inflation also normalized to 2.9% in 2019 from the previous year’s record high of 5.2%, which initially dampened consumption in 2018.
Still one of the fastest in Southeast Asia, the Philippine economy for 2019 was, however, marked with a slide in gross domestic product (GDP) from 2018’s 6.2% growth to 5.9% in 2019. In addition, extreme weather conditions also adversely affected the agricultural sector, with droughts from El Niño and typhoons devastating crops and the supply of goods.
Financial performance
Robinsons Retail managed to sustain growth at healthy levels within our key performance indicators. Consolidated net revenue grew by 22.8% to Php162.9 billion, while same store sales growth (SSSG) was stable and within target at 3.4% in 2019, despite coming from a high base of 5.9% with the implementation of the Tax Reform Law in 2018. Our Supermarket Segment registered SSSG at 3.6%, Drugstores at 9.9%, Convenience Stores at 3.2%, Do-it-Yourself at 2.5%, Specialty Stores at 1.4%, and Department Stores at 1.0%.
Gross profit margin improved by 30 basis points (bps) to 22.8%, attributable to larger scale, improvement in category mix in most segments, and full-year consolidation of the higher margin business of Rustan Supercenters, Inc. (Rustan), which is our biggest acquisition to date.
Effective January 1, 2019, the Company adopted the Philippine Financial Reporting Standard 16 (PFRS 16) on the accounting of leases, where the right-of-use asset is recognized and amortized over the lease term while interest expense is incurred on the lease liability. PFRS 16 adjustments are non-cash and have no effect on cashflow.
Rustan saw a complete turn-around in profitability within less than one year of acquisition, coming from negative EBIT (earnings before interest and tax) in 2018, finally going into the black in the second quarter of 2019, and with strong performance in the third and fourth quarter to become EBIT positive for the full year 2019. We see this as a result of robust consumption and successful integration with our primary supermarket business, Robinsons Supermarket.
In 2019, we recognized the need to rationalize our brand portfolio to streamline our business, as we divested Costa Coffee, which was unprofitable.
We opened the first No Brand store in Robinsons Galleria on November 22, 2019, which is a hard-discount store founded by South Korea’s EMart Group. The store sells a wide array of low-priced private labels, primarily quality grocery items, frozen goods, and non-food merchandise.
As of end 2019, our store network totaled 1,938 stores across the country, with 2,001 franchised branches of our community drugstore, TGP.
2019’s results and events also led to deeper reflections on the company’s role as a major retail industry player. These reflections are heavily informed by the value we create for our stakeholders and the whole of Philippine society.
Inseparable from the story of 2019, we also contemplate the legacy of our late father, founder and Chairman Emeritus, John L. Gokongwei, Jr.
Personal Losses and Celebrating Legacies
On November 9, 2019, our father John L. Gokongwei, Jr. peacefully passed away at 93. A week after, on November 16, 2019, our mother Elizabeth passed away as well. She was 85.
As we grieved our loss as a family, we honor the equally immeasurable impact they have made in our private lives, and the entrepreneurial values we carry day to day as stewards of the businesses founded by our father.
As an entrepreneur, we honor our father’s achievements in fostering vibrant spaces in Philippine business where he played and saw opportunity. Building from hard work and collaboration, he was able to create a dynamic ecosystem of various businesses that now are some of the most successful companies in their respective industrial arenas.
It was Mr. John’s vision to have these corporations serve as formidable economic drivers for the country, in the way that businesses ultimately impact lives through products, services, and their capacity to cultivate social mobility and economic capacity across the Philippines through job creation and livelihood.
As an entrepreneur,
we honor our father’s
achievements in
fostering vibrant spaces
in Philippine business
where he played and
saw opportunity.
Middle: Mr. John Gokongwei Jr., Chairman Emeritus of
Robinsons Retail Holdings Inc.
Right: Lance Gokongwei, Chairman of Robinsons Retail Holdings Inc.
People at the heart of
Robinsons Retail
Thus, while we are at the helm of the companies our father founded, we reflect on how we must continue to seek opportunities for inclusive prosperity and shared value. We see ourselves as a malleable group primed to embrace innovation and customer-centricity, where we consistently deliver above and beyond in the experience of retail for the people we serve.
In 2019, Robinsons Retail crafted a
new Vision and Mission:
Vision:
We enrich the lives of every Filipino with trusted products and solutions that bring them joy.
Mission:
We aim to be an innovative lifestyle partner and customer centric retailer of choice that provides delightful shopping experiences to every Filipino.
We enrich the lives of
every Filipino with
trusted products and
solutions that bring
them joy.
Standing by these new pronouncements, Robinsons Retail truly identifies as a company that addresses the needs of people across various touchpoints. We are fully aware of our purpose in seeking to provide access to essential products and services for our multitude of customers, and we strive to manage the company with perceptive leadership that our employees can rely on stable job conditions and fulfilling careers.
From our father’s method as an entrepreneur, our employees are our partners, and we see their welfare and their families’ as inseparable from the foundations of how we do business. Today, Robinsons Retail supports the jobs of over 20,000 people.
To bolster this commitment within the company, we continue our career development thrusts through the Robinsons Retail Academy, offering a multitude of training courses that upgrade skills and competencies among our employees. In 2019, close to 7,000 employees joined our advancement training programs, with a retention rate of 90.9% for those who joined.
We see this as an indicator of good employee engagement and our effectiveness in communicating to our employees that we value their development and loyalty. As we invest in our people, we strive to create mutually beneficial relationships where our employees define the successes of the company as their successes as well.
Our partnerships and the relationships we create are crucial in our day-to-day processes, as we strive to shape inclusive spaces that empower diverse individuals. Statistically, we rely heavily on female leadership, who comprise 70% of our management positions and total employee base. In a way, we believe this is intimately tied to our parents’ partnership, with our mother a constant presence in our father’s endeavors. Mrs. Elizabeth herself was directly involved as a pioneer in Robinsons Department Store, where she served as the Merchandising Head for several years.
Building the Nation Through Entrepreneurship and Education
Some of our fondest memories of Mr. John is how he believed in the timeless value of constant learning. As an avid reader himself, he strove to keep himself up-to-date with the latest news and developments in the private and public sector, as he plowed through a universe of books, countless reports, and news articles that painted the landscape with color and opportunities.
We believe it was this insight into opportunities and the courage to dive into them that was also crucial in his narrative space as a leader and industrialist. He saw the crucial role played by the private sector and entrepreneurship in social development, the value in educating oneself and others.
Ultimately, he always believed in the power of the Filipino people to build a strong nation. In Robinsons Retail, we reflect these principles and share the same beliefs.
Aside from economic empowerment through jobs directly supported by the company, we celebrate the fact that our growth is founded on relationships we have cultivated among a vibrant network of diverse suppliers and partners.
Through sourcing from large manufacturers and distributors to small and medium enterprises, to local farmers and fisherfolk in provincial locations, and engaging various non-trade partners for our trucking and logistical needs, we are able to participate in a sophisticated supply chain that ultimately brings products into Filipino homes. In addition, as a multi-format retailer, we likewise encourage entrepreneurship through our franchise model businesses Ministop and TGP, with 120 and 450 franchisees, respectively, as of end 2019.
To enhance our commitments to education, in October 2019, we piloted a partnership with the Department of Education – Pasig Division to assist Grades 11 and 12 students under the current K-12 Curriculum. Under this program, students were immersed in the some of our stores, namely Handyman Do it Best, Robinsons Appliances and Daiso Japan in Robinsons Galleria. Learning through experience the processes in storebased operations, the program is also seen as an opportunity to scout potential employees to be absorbed in Robinsons Retail, fulfilling the Department of Education’s aim to widen job opportunities for K-12 graduates.
We also recognize that support for education can follow multiple vectors, and we saw novel opportunities with Robinsons Supermarket that link nutrition to education, so we have worked with partner suppliers and organizations to assist underweight public-school children to have access to proper nutrition. One of our long-term partnerships with World Vision holistically supports over a hundred students to have access to basic needs and education, and we are crafting initiatives that explore the impact of the health of students on their academic performance.
Moving forward, Robinsons Supermarket seeks to further manifest its value proposition of health and wellness to serve as the foundational principle from which other advocacies can stem.
We aim to be an
innovative lifestyle
partner and
customer-centric
retailer of choice that
provides delightful
shopping experiences
to every Filipino.
The Digital Frontier
When we think back on our father’s leadership, we admired his openness for change, and unassailable courage to challenge himself and entrenched industry movers until he himself became one of the movers. We therefore learned as executives to embrace disruptors of our age, such as digitalization and data, and integrate them into the way we craft strategies and synergy for the long-term to remain competitive in an industry as dynamic as retail.
As such, we want to be able to empower customers as they shop. In 2019, Robinsons Bank (RBank), where Robinsons Retail has a 40% stake, launched the Robinsons Cashback Card, a co-branded credit card where customers can get up to 3% cash back on their purchases from Robinsons Retail stores.
We also have a 40% stake in Data Analytics Ventures Inc. (DAVI), which aims to be instrumental to our digital transformation strategy. DAVI, together with Robinsons Retail, now manages the Robinsons Rewards Loyalty Program. It is transformative in the way it magnifies our focus on data and science-driven decision-making across several aspects of our business, from crafting personalized marketing campaigns and strengthening the rewards business, to empowering our customers through insights and richer analytics.
We likewise own 30% of BeautyMNL and 28.6% in B2B platform Growsari Inc. BeautyMNL is the country’s top e-commerce platform for beauty, cosmetics and personal care products and services, and has also expanded to women’s fashion. Meanwhile, Growsari empowers small business owners, serving as a quick and convenient mobile-based replenishment solution for close to 20,000 sari-sari stores in 105 cities and municipalities as of end 2019.
The Path to Sustainability
We published our 2018 Sustainability Report in accordance to the Global Reporting Initiative (GRI) Standards in 2019. We delved deeper into how we operate as a business and saw the multifaceted ways our businesses contribute to making lives better for all our stakeholders under the metrics defined by sustainable principles and the United Nation’s Sustainable Development Goals.
Entitled “Better Lives Through Better Choices”, we focused on how our products and services, and processes create shared value, and collected preliminary data on how we impact the environment. In light of this, we understand and acknowledge the relevance of being part of the conversation on climate change and climate action, with its implications becoming especially relevant to the investing community, policy-makers, and our customers.
Now, with the information we have collected, we are in the process of developing a comprehensive strategy that incorporates sustainability into our long-term objectives, which are embedded into our strategic pillars.
The components of these strategies are heavily informed by our materiality, such as our commitment to providing safe and high-quality goods to the market, economic opportunities across our supply chain, and fostering an environment for career development and fulfillment for our employees.
We are deeply aware of the transitions into models driven by sustainability, very much heralded primarily by our younger market. In the future, we see that consumers will likely have greater demands in the reduction of waste and its effects on the environment, alongside legislation focused on the collective management of climate mitigation.
Some of our
fondest memories
of Mr. John is how
he believed in the
timeless value of
constant learning.
Gratitude and Remembrance
We all began our exposure to business with our father believing that we should start to learn all aspects of the business, from counting inventory to putting price tags on products, to eventually ushering the business forward through visionary and long-term strategies.
Now, we do our best to adapt to the current context of retail and the forces that shape it. Our experiences with Mr. John as a father and businessman have led us to understand the importance of leadership with empathy and authenticity among our people. As we continue and we persist, we envision a Robinsons Retail that he would be proud of.
We say thank you to our loyal customers, employees, shareholders and partners who have put their trust in us over the past years.
We do our best largely for the individuals we affect daily, and we do this to honor our father and mother, without whom none of this would have come to fruition, and to whom we are infinitely thankful.
With love and gratitude, thank you, Mom and Dad.
Happy shopping!
Lance Y. Gokongwei
Chairman
