Retail News
- Lianhua plans to add 400 stores
Date: 25-Apr-2007 Sources: (Shenzhen Daily)
LIANHUA, China's largest grocery store chain, plans to open at least 400 stores a year for three years and hopes its gross profit margin will gain more than 0.5 percentage points in 2007, an executive said.
Shanghai-based Lianhua Supermarket Holdings Co. reported nearly flat annual earnings amid fierce competition last week, but said it would open 400 stores in 2007 in order to increase its market share.
'We will continue with this pace of development for at least the next three years,'executive director and general manager, Liang Wei, said yesterday.
The firm opened just 107 stores in 2006.
The aggressive three-year plan, which focuses on Lianhua's core market in eastern China, comes after it struggled in 2006 with rising operating costs and competition from U.S. giant Wal-Mart Stores Inc. and France's Carrefour SA in China's hotly contested US$1 trillion retail arena.
Other players include Germany's Metro AG, Britain's Tesco Plc. and local operator Wumart.
'We hope our gross profit margin growth will surpass 0.5 percentage points in 2007,'Liang added.
In 2006, Lianhua's gross margin rose from 11.2 to 12.1 percent. Merrill Lynch estimates Lianhua's 2007 gross margin will be 12.5 percent.
Lianhua reported its net profit for 2006 rose just 0.8 percent to 241.6 million yuan (US$31.3 million), versus 239.7 million yuan a year ago.
The result lagged an average forecast of 273.15 million yuan, according to 15 analysts.
Lianhua runs self-operated as well as franchised supermarkets, hypermarkets and convenience stores and currently has 3,716 outlets mostly in the country's richer eastern region. The outlets include 1,960 convenience stores, 1,652 supermarkets and 104 hypermarkets, the most competitive of the firm's business segments.
In 2006, Lianhua's hypermarket business was unprofitable for the first time since 2003, with the operating margin down to -0.54 percent.
Intense competition still looms in 2007, particularly in the hypermarket arena.
Carrefour's China sales rose 53 percent to 24.8 billion yuan in 2006. Wal-Mart's sales gained 30 percent to 15.03 billion yuan, surpassing the overall market's 14 percent rise.
In February, Wal-Mart struck a US$1 billion deal to take over Chinese rival Bounteous Co., which operates 101 hypermarkets in 34 Chinese cities under the Trust-Mart brand, by 2010.
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