March 18, 2013 / 4:50 AM / in 5 years

UPDATE 1-Sun Art to open more than 50 new stores in China in 2013

By Donny Kwok

HONG KONG, March 18 (Reuters) - China’s largest hypermarket chain, Sun Art Retail Group Ltd, said on Monday it plans to open more than 50 new stores in China this year as it increasingly taps growth in less developed cities.

Sun Art’s expansion comes as foreign rivals such as Carrefour SA and Wal-Mart Stores Inc. have shut down stores in China, while other retailers such as Britain’s Tesco Plc and Germany’s Metro AG are slowing their mainland growth plans.

“Sun Art’s same-store sales growth has consistently outperformed its peers,” Nice Wang, an analyst from Yuanta Securities, wrote in a research note.

“Effective cost controls have limited the margin dilution effects from new store openings,” Wang said.

Sun Art, a joint venture between Taiwan conglomerate Ruentex Group and privately held French retailer Groupe Auchan SA , said it aimed to boost its market share this year by 0.5 percentage points from 13.6 percent at the end of 2012.

“We aim to open more than 50 stores in China this year, with a similar pace in the next few years,” Peter Huang, Sun Art’s executive director, told a news conference.

China’s hypermarket industry will be valued at 911 billion yuan in 2015, and the industry is seen expanding at a compound annual growth rate of 15.4 percent between 2010 and 2015, Yuanta Securities said.

Hong Kong-listed Sun Art entered the China market in 1998, three years after Wal-Mart, but overtook the U.S. behemoth in 2010 and has extended its lead since.

Sun Art opened 43 new hypermarkets last year, bringing its total to 273 hypermarkets in mainland China at the end of 2012.

On Sunday, Sun Art posted a 50.6 percent rise in its 2012 net profit due to retail network expansion into lower-tier Chinese cities even as an economic slowdown weighed on consumer demand.

The company, which sells mostly food, groceries and home appliances at its hypermarkets, said at an earnings press conference on Monday it aims to achieve same store sales growth of China inflation, plus 2 percentages this year.

The company’s shares were down 3.7 percent at the midday break on Monday, a day after the earnings were announced, lagging a 2 percent drop in the benchmark Hang Seng Index .

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