An artist's impression of Fontana's Portmore branch, which is expected to open in September.

Fontana Limited is looking to reap the benefits of recent technology investments and partnerships to further optimise its growing $5-billion business in 2023.

Fontana invested $59.09 million into the Eagle Software (POS) system which is the company's single largest technology investment in its 55-year history. Apart from integrating its rewards system across all its stores, it allows for the sharing of information with team members who can use their mobile phones to check what product is in inventory for its 1.7 million customers. The system was brought on stream in November during the Christmas season, which is one of the busiest seasons of the year.

"We now have the ability to check stock at any location immediately. So, if a customer needs something at another location, we can see it instantly. Additionally, the system has the ability to create pick lists to move inventory where it sells the best and generate automatic purchase orders for our vendors to ensure the most economical product mix and maximise sales. The new POS system is a wealth of information in terms of data to enhance the buying experience," said Chief Executive Officer (CEO) Anne Chang in an e-mail with the Jamaica Observer recently.

The investment comes at a time when Fontana is undertaking its new Portmore location which is valued at more than $100 million. The property, which is next to PriceSmart Portmore, has been impacted by a slight delay due to the dualisation of the roadway adjacent to its building. However, Chang is quite eager for the location to come on stream by September, four years after it opened its Waterloo location.

Chang...the new POS system is a wealth of information in terms of data to enhance the buying experience.

"We expect high demand -- since we opened in Kingston, people have been asking us to open a location in Portmore. We feel Portmore is currently underserved and have high expectations for this location," Chang added.

Its staff count is expected to move from 433 to surpass 500 persons once the Portmore location is open.

The company was able to achieve a record $2.13 billion in sales for its second quarter with its gross profit margins moving from 38.68 per cent to 39.21 per cent despite the inflationary pressures. The CEO attributed this margin improvement to purchasing overstocked products from its suppliers at a discounted rate, pricing and SKU (stock keeping unit) optimisation across all channels and consolidation of its foreign shipments to share fixed costs.

"Out of the California port, we had to do a lot of juggling to just try and get the goods on time to even get it here in time for last Christmas. Something that took six weeks would now take upwards of four months. It was a lot of logistical issues that our COO [Raymond Therrien] worked wonders to make sure that we had the goods when people needed them," said Chang at the company's annual general meeting on January 18.

Fontana imports from China, Panama, the United Kingdom, Canada and United States of America.

A recent drone shot of Fontana's Portmore location.

Despite Fontana earning more gross profit, a 25 per cent increase in total expenses to $490.47 million resulted in its operating profit only improving six per cent to $346.48 million. Due to the appreciation of the Jamaican dollar and negotiations of new leases, Fontana's finance costs decreased 43 per cent to $53.91 million. This left the company with its net profit up 30 per cent to $323.81 million with earnings per share (EPS) at $0.26.

Fontana also partnered with National Commercial Bank Jamaica Limited (NCBJ) as one of the pilot locations for customers to use the new NCB Pay mobile application. While limited to Visa customers and Android users, it allows Fontana customers to pay with their mobile phones instead of using their physical cards to pay.

"A lot of the things that we've added have been customer suggestions. We take it very seriously what the customers are asking for and they funnel a lot through our employees who have open doors to all of us. We always try to stay ahead of the trends to make sure that when it does start resonating with Jamaicans that we're there. So, a number of services that we've added or products have been people bringing it up," Chang added on improving the customer experience.

Fontana's H1 (first half) revenue is up 19 per cent to $3.78 billion with the company's net profit increasing by a third to $411.39 million and an EPS of $0.33. This left it with a trailing 12-month EPS of $0.57.

Total assets rose 10 per cent to $5 billion over the six months with the company's cash and cash equivalents swelling to $1.68 billion. While some of these funds are currently earmarked for Portmore, the remaining balance is currently being invested in short-term, low-risk instruments yielding 9.75 to 9.95 per cent with the company revising its investment strategy every six months to benefit from higher rates. Despite inventory moving up 30 per cent to $1.29 billion, Chang mentioned that things are beginning to stabilise more with supply moving from 58 days to 66 days in the most recent quarter.

Total liabilities increased seven per cent to $2.55 billion as its trades payables balance topped $904.66 million while shareholders equity closed the period at $2.45 billion.

Its share price closed on Tuesday at $8.65 which gives it a market capitalisation of $10.80 billion and a price to earnings ratio of 15.18 times.

Fontana is continuing to review its leases and come to a common ground with its landlords who wouldn't want to revert to Jamaican dollar leases at the moment. Its Ferry Warehouse allows for it to do centralised purchasing with its local distributors and continues to add support to its Montego Bay warehouse and its distribution network. It has also executed a soft launch of the Fontana Foundation with more information to be released throughout the year.

"Coming out of the pandemic we are seeing a return to the basics such as cosmetics and personal care. Our greatest current opportunity is to continue to increase our offerings in this category by maximising economies of scale through our buying [increased direct importation as well as partnering more closely with our current suppliers.] Obviously, opening Portmore will have the single greatest impact on 2023 growth, so we are doing everything within our power to ensure we open later this year," Chang closed.

BY DAVID ROSE Observer business writer

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