The Sogo operator denies over-expansion and sees prospects in the mainland despite a lack of profits at its Shanghai store Lifestyle International Holdings, the owner and operator of Sogo department store in Hong Kong, will hasten expansion on the mainland and Macau, even though its new Shanghai outlet is not yet profitable. The company last week announced it would invest $100 million to open its second Sogo in Tsim Sha Tsui in September. Managing director Thomas Lau Luen-hung rejected suggestions the company was over-expanding, saying it was a long-term strategy to grow its business by 2010. 'We are not taking a short-term view in our investment,' Mr Lau said. He expects its 690,000-square-foot Jiu Guang department store in Shanghai would produce a profit by next year. With Jiu Guang 20 per cent larger than Sogo in Causeway Bay, he believed the shopping centre could generate turnover of 1.5 billion yuan. The Shanghai store saw sales of 60 million yuan in December. Mr Lau is confident Jiu Guang would achieve a higher turnover given the 470,000 sqft Sogo in Causeway Bay had $3.5 billion in sales last year. 'With bright prospects in the mainland retail market, we hope to commit to one or two new projects a year,' he said. A mainland store would be similar in size to Sogo in Causeway Bay and Jiu Guang, Mr Lau said. In April last year, the company spent about $500 million of the $1.6 billion raised from an initial public offering to buy retail investments from the majority shareholders - the Lau brothers, who control Chinese Estates Holdings, and Cheng Yu-tung, the chairman of New World Development. The purchase included a 50 per cent stake in Cityplaza and a 65 per cent stake in Jiu Guang. Asked which cities were on Lifestyle's target list, Mr Lau said: 'We are actively looking at Beijing.' He said the expansion would involve either setting up a wholly owned store or buying into a new project. 'We are open at the moment,' he said. No capital outlay was given but the company has cash reserves of more than $2 billion. The company announced that profit increased 60.7 per cent from a year ago to $441.29 million in the 12 months to December. Turnover was $1.6 billion, up 23.4 per cent. However, Lifestyle's shares fell 1.12 per cent to close at $13.20 yesterday. Mr Lau said the strong performance was driven by improved margins and a $55 million interest saving during the year. Net profit margin improved to 12.4 per cent from 9.4 per cent a year ago. Sogo, with 18.3 per cent market share for department stores, generates an average daily traffic of 90,835. The record is 140,000 visitors in one day. Average customer spending per visit was $363, up 12 per cent from $324 a year ago.