Wumart to expand and focus on fresh food

Supermarket chain seeks to tackle competition after booking 0.4 per cent gain in first-half profit

PUBLISHED : Friday, 23 August, 2013, 12:00am
UPDATED : Friday, 23 August, 2013, 3:49am

Wumart Stores, a leading supermarket chain on the mainland, plans to enhance its fresh-food operation and expand to eastern cities to compete against bigger rivals such as United States giant Wal-Mart Stores and Sun Art Retail's RT-Mart.

First-half net profit at Beijing-based Wumart edged up 0.4 per cent year on year to 340 million yuan (HK$430 million).

Revenue increased 11.5 per cent to 9.56 billion yuan.

The company attributed the revenue growth to comparable store sales, which rose 3.8 per cent during the period, and the contribution from newly opened stores.

Gross profit margin edged up 0.1 percentage point to 19.9 per cent.

"During the first half of 2013, the retail sector experienced intensified competition," said Wu Jianzhong, the chairman of Wumart.

"The group will further increase its efforts in expanding in Tianjin and eastern China … [and] target fresh-food operations as its long-term strategy."

In June, Wumart had 541 stores in Beijing and Tianjin and in Hebei and Zhejiang provinces, compared with 529 a year earlier. They comprised 145 superstores and 396 mini-marts.

Rising labour and rental costs remained key challenges for the retailer, as its distribution and selling expenses jumped 17 per cent and administrative costs surged 25 per cent during the six months to June.

Growth in the mainland's retail market has been slowing this year. Total retail sales growth dropped to 12.7 per cent in the first half of the year from 14.3 per cent a year earlier, official statistics show.

Wumart, which competes against Walmart, operated by Wal-Mart Stores, and RT-Mart, run by Hong Kong-listed Sun Art Retail, is seeking to establish a core competitive advantage in the fresh products category as part of its efforts to deal with weakened customer demand and intense competition.

Earlier this year, the company established a fresh-food business unit to improve its business in vegetables, fruits, meat and cooked food.

The directors did not recommend an interim dividend.

Wumart's share price rose 2.47 per cent to HK$14.94 yesterday. The Hang Seng Index closed 0.36 per cent higher.