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China's Suning shares jump as it plans network of "super stores"
September 5, 2012 / 6:20 AM / in 5 years

China's Suning shares jump as it plans network of "super stores"

HONG KONG (Reuters) - Shares of China’s top home appliance retailer, Suning Appliance Co Ltd (002024.SZ), rose to a six-week high on Wednesday amid news that it plans to launch a network of “super stores” to offset slow growth in its core business.

Suning, which competes with GOME Electrical Appliances (0493.HK) and is seen by some as China’s answer to Best Buy (BBY.N), has been hit by a slowdown in the world’s second-largest economy that has sapped consumer demand and led to a 29.5 percent slide in its first-half profit.

The company, which operates a network of about 1,700 stores, will open four Suning Expo Super Stores in Beijing, Shanghai, Guangzhou and Nanjing later this month. It aims to open 20 super stores this year, it said on its web site this week. The super stores will sell everything from books to daily necessities.

It planned to operate a network of 400 in the next three years by upgrading existing retail stores, it added.

“It’s a positive move,” said Steve Chow, analyst at Kingsway Research. “In the current difficult environment, it is a way out when not many options are available.”

The company's Shenzhen-listed shares, which have dropped 21 percent so far this year, rose 5.6 percent to an intraday high of 6.74 yuan, the highest since July 25 and outpacing a 0.5 percent gain in the Shenzhen index .SZSA

Suning Expo Super Stores would be located in prime locations in first and second-tier cities, selling home appliances, general merchandise, books, and daily necessities, it said.

The move will put Suning in direct competition with local operators such as Sun Art Retail (6808.HK) and Wumart Stores 1025.HK, as well as foreign giants like Walmart (WMT.N) and Carrefour (CARR.PA).

“Suning needs to diversify. Its main advantage is that it has a lot of locations around the country, but as a retail destination it has fallen behind,” said James Roy, an analyst at China Market Research Group.

“If it’s going to compete with the likes of Wal-Mart, Carrefour and Wu-Mart, Suning is going to have to modernize its retail format significantly.”

Reporting by Donny Kwok and Twinnie Siu; Editing by Anne Marie Roantree and Matt Driskill

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