Sun Art cuts back store growth in tough market

Source:Reuters Published: 2016-2-29 21:43:01

Sun Art Retail Group said on Monday it will scale back on new store openings in China this year as it grapples with a challenging retail environment. It also expects a greater contribution to sales from e-commerce.

Sun Art, the second-biggest hypermarket operator  in China with 13.7 percent of the Chinese market after top player China Resources' 15.2 percent, said the overall retail market will track slowing economic growth in the Chinese mainland in the absence of a market-moving change.

"The operating environment remains difficult this year," CEO Bruno Mercier told a results briefing.

Even so, the company's shares made their biggest daily percentage gain since August 2015. Sun Art's gross profit margin rose and Mercier said he expected to see break-even or slight growth in same-store sales this year.

The company also said its e-commerce operations will grow to account for 5 percent of sales in 2016 against 1 percent in 2015.

On Sunday, the company reported a 15.7 percent fall in 2015 profit, the first yearly decline since its listing in July 2011, as it faced intense competition from fast-growing e-commerce platforms.

The joint venture between Taiwan-based conglomerate Ruentex Group and French retailer Groupe Auchan SA said net profit amounted to 2.4 billion yuan ($373.15 million) in 2015, compared with an average forecast of 2.5 billion yuan from 16 analysts polled by Reuters.

"The pressure on offline retailers from the rapid growth in e-commerce platforms will still persist for us," company chairman Cheng Chuan-Tai said in a filing to the Hong Kong stock exchange.

Sun Art opened 38 new stores during the year, bringing its total to 409. It said it will trim its new store opening target to 30 to 40 annually, from 40 to 50 in the past.

Turnover rose to 96.4 billion yuan from 91.9 billion yuan a year earlier. The gross profit margin increased 0.4 percentage point to 23.3 percent.

Same-store sales fell 3.6 percent, compared with a 1.6 percent decline in 2014, due to slower growth in the consumer market, a wider choice of outlets for customers and intensified competition among different retail channels.

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