Retailer continues with expansion and acquisitions to stay ahead of the field The mainland's biggest domestic food retailer is confident of beating the challenge of Wal-Mart Stores, the world's largest chain store, and will maintain a rapid pace of expansion and acquisitions to stay ahead of the field. Lianhua Supermarket Holdings chief financial officer Xu Lingling yesterday addressed institutional investors at a forum arranged by BNP Paribas Peregrine. Lianhua is headquartered in Shanghai, home to 1,795 of its 3,377 outlets nationwide and the most competitive retail market in the country. Wal-Mart opened its first megastore in the city during the summer. 'Wal-Mart came late to Shanghai,' Ms Xu said. 'It will have to grow through acquisitions and the government will not approve so much land. 'Shanghai is where we began and we have close relations with local governments. We have a famous brand. At the same time, we have studied and learnt from Wal-Mart. The difference between us is narrowing. We are confident.' She said the one area where Wal-Mart had an edge was its global buying power, which enabled the retailer to earn the best prices. 'Foreign firms are our rivals but they cannot beat us in our breadth of coverage and our links with local governments. We know better how to do mergers and acquisitions. Small local firms prefer to co-operate with us,' she said. In the first half of this year, Lianhua reported a net profit of 130.97 million yuan on turnover of 6.89 billion yuan, compared with 215.54 million yuan on turnover of 10.85 billion yuan for the whole of last year. This is the first year of full deregulation of the mainland's retail market under the World Trade Organisation accession, in which foreign retailers face no geographic or shareholding restrictions. Ms Xu said Lianhua opened 254 outlets in the first half and planned to open 600 for the whole year, including acquisitions. It would also continue to concentrate on its home base of Shanghai and Jiangsu and Zhejiang provinces. In Shanghai, it competes with Wal-Mart in a joint venture with Carrefour, of which it owns 45 per cent. The venture operates eight hypermarkets in the city. In a research report this month, BNP Paribas said it was bullish on the company. 'While sustaining its rapid expansion plan spearheaded by hypermarkets, Lianhua has reversed the downward trend in profit for its supermarkets,' it said. 'But swelling operating costs, mainly rental costs, have more than offset the gains from gross margin. Its rental cost jumped 45 per cent year on year [in the first half of the year] to 304 million yuan against revenue growth of 31 per cent, dragging down its operating margin to 2.2 per cent from 2.5 per cent a year ago.'