China Resources Enterprise (CRE) plans to lay off up to 3,000 staff at its supermarkets and hypermarkets in Hong Kong and China this year as it integrates businesses acquired last year. According to executive director Francis Kwong, the retrenchment plan was expected to reduce overheads by HK$50 million, for the red-chip conglomerate, whose businesses include supermarkets, beverages, textiles, property and oil distribution. In a bid to make its mainland operations profitable as soon as possible, the company is considering slowing expansion in China this year. 'Opening new stores at a fast pace will hit the bottom line,' said Mr Kwong. The company would review its expansion pace in the middle of the year. It would probably open fewer than the 70 new stores planned for this year. HSBC estimated CRE would open 13 new hypermarkets and 50 supermarkets this year. Mr Kwong said the proposed lay-offs, accounting for about 15 per cent of its 18,000 supermarket workforce, was aimed at streamlining its businesses. Overlapping had occurred in areas such as finance departments, following the acquisition of Guangdong's largest hypermarket operator China Vanguard. In mid last year, CRE acquired a 65 per cent stake in China Vanguard, now known as China Resources Vanguard and followed that in September by buying almost 40 per cent of Jiangsu province's largest supermarket chain operator, Suguo Supermarket. Mr Kwong said the layoffs would come mainly from low and medium management in China but some Hong Kong staff would also be affected. The company hoped to improve the quality of its management through the streamlining, he said. CRE has 376 self-operated supermarkets - 77 in Hong Kong and the remainder in China. It also has 17 mainland hypermarkets. CRE's revenue targets of 12 billion yuan (about HK$11.25 billion) for this year and 50 billion yuan by 2007 remained in place, Mr Kwong said. HSBC welcomed the company's move to reduce overheads but recommended investors reduce their investments in the stock because of Sars concerns and the uncertain outlook of its supermarket operations. It was rumoured that China Resources Vanguard posted losses of 15 million yuan in January and 20 million yuan in February, due to keen competition. UBS Warburg also cut its forecast and rating for CRE's shares in anticipation that its beverage, retail, oil distribution and commercial property rentals would be affected by the Sars outbreak. It cut its net profit estimate for the year by 22 per cent to HK$1.31 billion.
