Henry Sy's SM - History of Shoemart's Supermalls

Posted by Coconuter at 7:15 AM

If you've been through or have lived in one

of the Philippines' major metropolitan areas, particularly Manila, then I'm sure you have
noticed if not gazed at (if you are a new visitor) the magnificent and monolithic
compounds of SM.

[photograph on right: Henry and his children Tessie and Hans tour the family's
Megamall in Manila (photo courtesy of Time Magazine)]

Shoemart (SM)

Shoemart, as SM was originally known as, is the Philippines' leader in the retail industry
and comprises of the SM Group of Companies. SM Group, is a retail giant with 38,600
employees and annual revenues of $1.7 billion. SM Prime Holdings, Inc. (PSE: SMPH),
a part of the SM Group of Companies, is the largest shopping mall operator in the
Philippines. And guess what? The owner of it all, Chinese-Filipino Henry Sy, Sr., the
Philippines' "Retail King," is the richest man in the country (14th wealthiest person in
Southeast Asia [Forbes, 2006], 74th richest in the Asia and Australia region [Forbes,
2006], and 355th wealthiest in the world [Forbes, 2007]).

Henry Sy, Sr., Philippines' "Retail King"

The tycoon, or taipan as known in Asia, is a long way from his humble start. His
impoverished family left China when Sy was twelve years old and opened a corner
grocery in Manila. Sy later sold shoes, traveling 40 hours by propeller plane to New
York just to get them. But his diligence and hard work payed off. He soon picked up
retailing ideas in the U.S. and started his own store. By 1985, Sy had expanded,
opening a department store. He has been expanding ever since. "I make things
happen," he says. Forbes states that Sy is worth US$4 billion, but some estimate Sy's
assets to total US$5 billion [Forbes, 2007]. Others estimate that he controls 40-60% of
companies worth more than US$15 billion, but such claims have not been verified.

Sy presides over a conglomerate that relies on sales of low-priced consumer goods to

prosper even in recession. His air-conditioned Megamalls have turned traditional
Sunday afternoon family time into shopping expeditions. Although, perhaps the
Philippines' equivalent of Sam Walton's Wal-mart in the United States, Sy's SM Group
proves to produce more sophisticated, modern, and quality compounds.

All in the Family Management

SM Group's management team is composed of Teresita, President of Shoemart Inc.

and Chairman of Banco de Oro Universal Bank, the family’s main retail and commercial
banking interests; Henry Jr., President of SM Investments Corporation and Senior Vice
President of SM Prime Holdings, Inc. and who keeps an eye for new ventures; Hans,
head of mall construction and operations; Herbert, in-charge of SM Supermarket;
Elizabeth, Senior Vice President for marketing; and Harley, SM Prime’s Senior Vice
President and Treasurer.

All children adhere to the disciplined work ethics expounded by the father. Furthermore,
they have developed into experts in their respective fields.

But no matter how successful the company has proved to be, Sy's children realize that
their all-in-the-family management style is becoming outdated. Like so many of Asia's
big business clans, a generational shift and the stresses of running an increasingly
complex company are forcing the insular Sys to open up more and more to outsiders.
"For my father, the organization is the family," says Sy's eldest daughter, Teresita Sy-
Coson, whom the family calls "Tessie." But "in the future, you'll see more professional
managers," she adds.

Although Henry Sy, Sr. wants to go slow on hiring outsiders, since kin can be counted
on for their loyalty after all, the business has simply become too large for just a few
people to manage.

SM's Growth

Today, the empire continues to grow in size and sophistication. Currently, it has 28
operating malls totaling a gross floor area of 2.7 million square meters. SM Prime
Holdings, Inc. has amassed a land bank of 130 hectares in 14 different strategic
locations. SMPH posted an 8.6% increase in net income to P4.62 billion from P4.26
billion. This is due to a healthy increase in gross revenues, by 15.99% to P10.21 billion
from P8.80 billion. Rental income, which contributed 80.14% of the Company's
revenues, rose by 17.18% to P8.18 billion from P6.98 billion. This was due to rentals
from three additional SM Supermalls opened in the last quarter of 2003, namely, SM
City Lucena, SM City Baguio and SM City Marilao and the opening of SM City
Dasmarinas and SM City Batangas in 2004. On the other hand cinema ticket sales
increased by 11.26% to P1.50 billion from P1.34 billion. Other sources of revenue grew
12.01% to P532.52 million from P475.43 million.

Sy controls the Banco de Oro Universal Bank and China Banking Corporation. He
recently bought the remaining 66% of Equitable PCI Bank, the Philippines 3rd largest
lender which he already had a 34% stake before the purchase and will soon merge it to
Banco de Oro Universal Bank. This merger would create the Philippines's largest
financial institution. The Sy family has a personal stake of $2.6 billion in these 3 banks.
Mr.Sy also owns 12% of San Miguel Corporation, Southeast Asia's biggest food and
beverage conglomerate at an estimated worth of $500 million.

SM Supermalls, owned by SM Prime Holdings, Inc., is the largest chain of shopping

malls in the Philippines, having 28 malls across the country and three overseas
branches in Jinjiang and Xiamen, China and one in Guam. SM Prime Holdings, Inc.'s
main sources of revenues include rental income from mall and food courts, cinema
ticket sales and amusement income from bowling and ice-skating. SM Prime Holdings,
Inc. consists of the SM Supermalls, Standalone Appliance Centers, Specialty Shopping
Malls, Standalone department stores, and Standalone supermarkets.

SM Supermalls List

Philippine Branches:
[SM City North EDSA, SM City Sta. Mesa (SM Centerpoint), SM Megamall (SM
Ortigas), SM City Cebu, SM Southmall (SM Las Pinas), SM City Bacoor, SM City
Fairview, SM City Iloilo, SM City Manila, SM City Pampanga, SM City Sucat (SM
Supercenter Sucat), SM City Davao, SM City Bicutan, SM City Cagayan De Oro, SM
City Lucena, SM City Marilao, SM City Baguio, SM City Dasmarinas, SM City Batangas,
SM City San Lazaro, SM Supercenter Valenzuela, SM Supercenter Molino, SM City
Santa Rosa, SM City Clark, SM Mall of Asia, SM Supercenter Pasig, SM City Lipa, SM
City Bacolod, SM City Taytay, SM Supercenter Muntinlupa, SM Supercenter Baliuag,
SM City Marikina, SM City Naga, SM City Calamba, SM City Tarlac, SM City Urdaneta,
SM City Laoag, SM Supercenter San Pablo, SM Supercenter Rosales, SM City
Dagupan, SM Supercenter Meycauayan, SM Supercenter Tagaytay, SM Supercenter
Dumaguete]

Branches in China
[SM North Xiamen, SM South Xiamen, SM Chuan]

Branch in Guam
[SM Guam]

Standalone Appliance Centers

[SAC Rockwell Power Plant Mall, SAC V-Mall Greenhills]

Specialty Shopping Malls

[The Podium]

Standalone Department Stores

[SM Quiapo, SM Cubao, SM Makati, SM Harrison Plaza, SM Iloilo-Delgado, SM Anilao
Beach]

Standalone Supermarkets
[SM SaveMore Iloilo-Jaro Town Square, SM SaveMore Muntinlupa, SM SaveMore
Angono, SM SaveMore Marikina, SM Super Hypermarket Iloilo-Jaro, SM Super
Hypermarket Mabolo, SM Super Hypermarket Carmen, SM Super Hypermarket Mactan]

Of these malls, SM Mall of Asia is the largest shopping mall in the Philippines and the
7th largest shopping mall in the world in terms of gross floor size.

SM's Future

Down the road, the Sys also want to diversify into commercial real estate and tourist
resorts. Having managers with personal stakes in the company's success is what gives
SM its backbone, Sy maintains. But Tessie and her siblings, like many in Asia's younger
generation, also want the luxury of enjoying their success. After their father recedes
from the business, they'll run the company by committee, the children say, though many
in Manila expect Tessie to take the lead. She envisions a different role for the family, in
which they provide oversight while professional managers handle day-to-day
operations. Then "we can sit back and relax," Tessie hopes.

References: Wikipedia, Time Magazine, Business Week Magazine, Philippine Business

Magazine