Xinyu Hengdeli Holdings, a mainland distributor of international brand-name watches, plans to expand its retail network to second-tier cities this year after having made inroads in the biggest cities. The company, which has 65 mainland stores, expects to spend more than 100 million yuan this year to open between 20 and 25 new outlets, mainly in second-tier cities, including Wuhan and Chongqing, according to financial controller and company secretary Peter Ng Man-wai. The expansion plan was unveiled after the company reported net profit rose 24.1 per cent to 121.01 million yuan last year, compared to the previous year's 75.9 per cent gain. Mr Ng said that five million yuan was required on average for a store opening, which included decoration and purchase of watches from manufacturers. 'Besides opening traditional stores, which sell a variety of brands, we are exploring opening some single-brand stores,' he said. Mr Ng said the company would 'test the waters' in second-tier cities by selling cheaper watches. 'We will see the market response and adjust our mix of brands accordingly,' he said. About 46 per cent of last year's revenue came from retail. Chairman Zhang Yuping, who expects retail to be the main growth driver, said the company aimed to lift this contribution to 50 per cent of total turnover this year as the segment had higher margins. The retail gross margin was 34.7 per cent last year, significantly higher than the 17.9 per cent on wholesaling. The firm had 207 million in cash at the end of last year. Turnover fell 8 per cent to 1.39 billion yuan last year.