Fontana Limited’s first-quarter revenue increased 26 per cent to $1.64 billion due to a more active back-to-school season this year, as the last two years’ activities were subdued by the novel coronavirus.

The company’s gross profits grew by over one-third to $588.79 million, with margins expanding by 35.8 per cent due to reduced freight rates and a shift in the sales mix to higher-margin items. This compared to 33.8 per cent in the same period in the prior year.

When asked about the transaction shift and growth, Chief Executive Officer Anne Chang explained, “The transaction mix has shifted somewhat to higher-margin items which more specifically refer to back-to-school (not stationery) and home goods. Our transactions continue to show improvements with the extended shopping hours.”

During the period, Fontana spent $350 million on additional inventory as it geared up for the busy Christmas season, taking its inventory balance to $1.34 billion, the highest in its history. Its Christmas quarter sales topped $1.85 billion last year.

“We expect a strong Christmas season and have taken advantage of oversupply of goods from our overseas suppliers with better pricing and increased selection. The growth rate has been consistent for the past six quarters as we have managed stock levels and customer service levels,” said Chang in an e-mail to the Jamaica Observer.

Despite expenses moving up 35 per cent to $464.28 million, its operating profit improved 27 per cent to $124.51 million. With an increase in other income and finance costs, Fontana’s net profit grew 43 per cent to $87.58 million.

Its earnings per share (EPS) for the quarter was $0.07, which leaves it with a trailing 12-month EPS of $0.51.

While Fontana was originally targeting a summer 2023 opening for its Portmore location, Chang revealed that the timeline has shifted slightly due to the dualisation of the roadway along Braeton Parkway and Municipal Drive. Thus, Fontana is expecting interior buildout to be completed in March 2023 and the grand opening by fall 2023.

Fontana has allocated $100 million to this location, which was funded by a $500-million bond. Fontana opened a warehouse along Ferry earlier this year from the bond proceeds as well.

Fontana’s total asset base has increased year-on-year by 20 per cent to $4.71 billion, which includes non-current assets of $1.84 billion and a cash balance of $1.35 billion. Shareholders equity rose 21 per cent to $2.25 billion with shareholders set to benefit from a dividend payment on December 12 for those on record as of November 25.

While Fontana’s total liabilities have risen by 20 per cent to $2.46 billion, its near-term debt has considerably shrunk with only $46.06 million in bank debt due over the next two to four years and $493.56 million for a bond due in December 2027.

When asked about the additional opportunities for targeting new stores across the island, Chang replied, “Fontana continues to grow our market share and penetration of business, a demonstration of the strength of our brand. We are always on the lookout for new opportunities.”

Fontana’s stock price remains up 15 per cent year-to-date at $8.58, which leaves it with a market capitalisation of $10.72 billion. This means it has an price-to-earnings ratio of 16.82 times. Astronomical Holdings Limited, which is controlled by attorney-at-law Able-Don Foote, increased its stake in Fontana by an additional 101,000 units to 12,931,000 shares during the quarter while JCSD Trustee Services Limited A/C#76579-02 added an additional 332,766 shares to increase their position to 8,332,842 shares. The company’s annual general meeting will be held on January 18 at 11:00 am by the Grand-A-View Restaurant and Event Place in Montego Bay.

“We are optimistic for our business as we have continued to grow each year. We are extremely flexible in all aspects of our operation, and this has allowed us to make changes to whatever external challenges arise to the best of our ability,” Chang said, regarding her outlook for Fontana.