SOS Q1 Earnings Dip On Costs Pressures

  • For the first quarter ended March 31, 2025, Stationary and Office Supplies Limited (SOS) reported a 23.0% year-over-year decrease in net profit attributable to shareholders, falling to J$73.56Mn from J$95.58Mn in Q1 2024, as rising direct and operating costs weighed on earnings.
  • Revenue for the quarter rose 2.4% year-over-year to a historic high of J$537.47 million, up from J$524.81 million in the prior year. The increase reflects SOS’s ongoing push to broaden its customer base and enhance market reach.
  • However, direct costs rose 11.9% to J$262.03 million, outpacing revenue growth and driving a 5.3% decline in gross profit to J$275.44 million. As a result, gross profit margin contracted by 4.1 percentage points to 51.2%, compared to 55.3% in Q1 2024.
  • The margin erosion was driven by the continued depreciation of the Jamaican dollar, along with SOS’s strategic choice to absorb rising input costs—including increased shipping charges and higher tariffs—without passing these on to customers.
  • Total operating expenses also deteriorated, increasing by 8.1% (+13.8Mn) mainly due to higher staff costs. Consequently, operating profit contracted by 26.9%, or J$29.12Mn during the quarter to close at $J79.08Mn. Additional pressure from finance costs further dragged down the bottom line, resulting in the 23.0% drop in net profit.
  • Looking ahead, SOS is banking on continued expansion in its SEEK manufacturing facility and the growth of its EVOLVE furniture line to support future earnings. The SEEK facility upgrade is scheduled for completion by mid-2025 and is expected to significantly increase production capacity and diversify the product range under the SEEK brand. Meanwhile, the EVOLVE line delivered 40% growth in 2024 compared to the previous year. Management believes this line still has significant growth potential and will continue to invest in its development.
  • Additionally, SOS is actively enhancing its inventory and product diversification. Management reported that its procurement team is exploring opportunities to expand the company's offerings in both stationery and furniture. This includes attending trade shows to identify new trends and negotiating with manufacturers to optimise costs and increase value.
  • SOS’s stock has declined 11.3% year-to-date, closing at J$1.49 on Tuesday. At this price, the stock trades at a price-to-earnings (P/E) ratio of 16.6x, which is lower than the Junior Market Distribution Sector’s average of 36.5x.

(Sources: SOS Financial Statements and NCB)