SSI Group’s Nine-Month Profit Plunges 49% Amid Rising Operating Costs

SSI Group, Inc. reported a sharp decline in profitability for the nine months ended September 30, 2025, as operating expenses surged despite flat revenue growth.

The specialty retailer posted ₱639.8 million in net income, down 49.3% from ₱1.26 billion in the same period last year. Third-quarter earnings fell even steeper, dropping 65% to ₱188.1 million.

Sales remained largely unchanged, inching up 0.7% to ₱20.32 billion, while gross profit improved slightly to ₱9.08 billion, with margins rising to 44.7% from 44.2%. However, operating income plunged 44.9% to ₱914 million as expenses ballooned.

“The increase in costs was driven by store network expansion and technology investments,” SSI said in its quarterly filing.

Operating expenses climbed 12.4% to ₱8.18 billion, fueled by higher rent, depreciation, and personnel costs linked to a 13.6% increase in selling space and the rollout of SAP and ETP enterprise systems. Selling and distribution costs rose to ₱6.58 billion, while general and administrative expenses jumped 17.4% to ₁.60 billion.

The company opened 17 new stores during the quarter, bringing its total to 613 outlets nationwide, and expanded its brand portfolio to 103 names. E-commerce contributed ₱1.57 billion, or 7.7% of total sales.

SSI ended the period with ₱2.78 billion in cash, down from ₱5.14 billion at year-end 2024, after spending ₱1.20 billion on capital expenditures, paying ₱503.6 million in dividends, and repurchasing shares worth ₱50.4 million.

Despite the earnings slump, SSI maintained a net cash position of ₱1.39 billion and a current ratio of 2.11, signaling adequate liquidity ahead of the holiday season, traditionally its strongest quarter.

Outlook / Investor Takeaway

Holiday Quarter Critical: SSI’s inventory build to ₱13.15 billion positions it for peak season sales, but execution risk is high. Strong sell-through and markdown discipline will be key to converting stock into cash.
Margin Recovery Hinges on Cost Control: ERP transition costs and store expansion drove operating margin down to 4.5%. Normalization of G&A and leveraging new stores will determine if margins rebound in Q4.
Liquidity Cushion Intact: Net cash and low leverage (Debt/Equity at 0.08) provide breathing room, but free cash flow needs improvement after negative operating cash flow in 9M25.
Watch Luxury Segment: Luxury and Bridge sales fell 3.8%, signaling discretionary weakness. Performance in this category during the holidays will be a bellwether for 2026.
Valuation Implication: With EPS at ₱0.19 (vs ₱0.38 last year), investors may reassess growth expectations. Near-term upside depends on holiday performance and cost discipline.

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