Aeon Stores to freeze expansion in Hong Kong, and switch focus to China
Aeon Stores (Hong Kong), which operates Jusco department stores and supermarkets in the region, said it would freeze its expansion in Hong Kong and divert more resources to the mainland, after posting a 41 per cent drop in net profit last year because of losses in new stores.
"The economic condition in Hong Kong will inevitably be dragged down by the slow growth in the US economy," said Chan Pui-man, the managing director of Aeon Stores.
Net profit tumbled to HK$238.9 million from HK$405.9 million in 2011, as a result of rising operating costs, expenses for new stores and impairment losses in its properties.
Generally, investment in new stores can be recouped within 50 months. But rising construction costs in Hong Kong and the global downturn mean it now takes longer.
Last year, the group opened five stores in the city - in Tsuen Wan, Tai Wo Hau, Tseung Kwan O MTR station, Tai Wai station and Lohas Park station, bringing the total number to 43.
Chan said the company would focus on optimising the performance of the newly opened stores rather than adding new ones this year.
The group will invest HK$276 million in capital expenditure. A chunk of it - HK$ 251 million - will be used to fuel expansion on the mainland. As of the end of last year, it operated 25 stores on the mainland, up five from 2011.
The company is still confident of the mainland market even though the Sino-Japan tension over the disputed islands recently forced one of its stores to suspend operation.
Shares in the company rose 2.08 per cent to HK$19.60 yesterday.