A Year After the TRAIN Law, This Philippine Retailer Earned …

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One of the Tax Reform for Acceleration and Inclusion (TRAIN) law’s most promising provisions is the bigger take-home pay for employees earning P30,000 and less a month. Under the law, taxpayers earning a taxable income of P250,000 a year or less are exempted from paying personal income taxes. More than 900,000 workers were estimated to benefit from the program. With more cash, it was expected that consumers were bound to spend on goods.

 

While the expected higher household income spending did not always translate to faster gross domestic product growth (the country recorded its slowest GDP in the third quarter of 2018 in the past three years), the more cash-rich Filipinos did bring good fortune to retailers.

 

In their year-end financial reports for 2018, many of the country’s listed retailers clinched double-digit percentage growth in their gross sales for the year in contrast to the previous time period. See infographic.

 

Grocery operators Puregold Price Club Inc. (PGOLD) and Robinsons Retail Holdings Inc., the companies running S&R and Rustan’s Supermarket, respectively (aside from their namesake brands), both credited the higher take-home pay of most consumers for the increase in their sales.

 

In a statement, RRHI said its supermarket segment drove the strong same-store sales growth of its retail business as “brought about by the increase in disposable income from the reduction in personal income tax.”

 

Puregold echoed the same sentiment, as its same-store sales growth were also sustained “both by minimum wage inflation and higher take-home pay as a result of the tax reform law.”

 

But the retailer that benefited the most from all the shopping Filipinos did last year is the operator of 7-Eleven convenience store chain, Philippine Seven Corp. Out of the six listed retail companies, Philippine Seven recorded the highest percentage surges, both in its year-end gross sales and net income.

 

 

According to Philippine Seven Corp. president and CEO Jose Victor Paterno, this is the company’s strongest financial performance since 2013, the year the government imposed higher tobacco excise taxes.

 

“The full year story is one of strong same-store sales growth driven by a tax cut that most benefited the lower middle class, who over-index in our stores, and an excise tax on sugar-sweetened beverages, which narrowed relative price differences between mass market and premium products, the latter of which are overrepresented in our stores,” Paterno explained.

 

Even luxury retailer SSI Group Inc. saw a massive improvement in its bottom line. The company hit a nine-percent increase in its gross sales in 2018 with P2.02 billion, after only enjoying a meager 0.10 percent increase in the previous time period.

 

The only retailer that incurred losses last year was Metro Retail Stores Group Inc., but that’s mainly because of a fire that ravaged one of its supermarkets.

 

 

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This story originally appeared on Esquiremag.ph.

* Minor edits have been made by the Entrepreneur.com.ph editors.