China Resources to scale back store openings
China Resources Enterprise, a consumer-focused conglomerate, will reduce the number of store openings by a third and slow the pace of acquisitions this year because of the unclear outlook for the global economy, a company executive said.
'We initially planned to open about 300 stores this year, but probably we'll only open 200 stores,' managing director Chen Lang said yesterday after the company's annual meeting.
Another reason was that some property developers could not complete their projects on schedule, Mr Chen said. 'It makes it difficult to find a suitable place to open new stores.'
He said the company had initially earmarked HK$2.3 billion in capital spending for its retail businesses this year, but based on the latest plan, it could reduce that amount by about 20 per cent. However, its overall capital spending will remain at HK$6 billion this year.
The savings might go to the beer business, which enjoyed higher earnings growth, said deputy managing director Francis Kwong Man-him.
The red-chip company, which operates supermarkets and produces Snow beer with SABMiller, said earlier that first-quarter net profit fell 34.74 per cent to HK$417 million.
Same-store sales at its more than 2,600 supermarket stores in Hong Kong and on the mainland fell 3.6 per cent, hit by the slowing economy and deflation.
Mr Chen said same-store sales in April and May fell between 1 and 2 per cent, showing a mild improvement.
'We aim to have positive same-store growth for the whole year, but earnings from the retail business this year are unlikely to have a positive surprise.'
By comparison, performance of the beer business was more encouraging, since beer consumption was less susceptible to economic fluctuation, he said.
Beer operations reported a 20.5 per cent rise in sales volume to 1.56 million kilolitres in the first quarter. 'With the approach of the peak season, we expect growth will continue,' he said, adding that the margin was also improving because of the fall in raw material prices and interest rates.
Mr Chen said he expected volume growth of its beer sales to be at least 10 per cent for the entire year and revenue to show double-digit growth.
However, the company's textile business was expected to post a loss for the full year even though orders had increased recently, as overall export demand was still weak, he said.
The company's textile business reported a HK$74 million loss in the first quarter.
Growth on tap
Focus to be on beer business, which enjoys higher earnings growth
Planned store openings this year will probably be reduced from 300 to 200