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Convenience Retail Asia faces cost pressures

High rents lead to 7.7 per cent drop in profit at Circle K and Saint Honore operator

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Convenience Retail Asia’s interim net profit dropped 7.7 per cent to HK$60.1 million from the same period last year. Photo: Dickson Lee

Convenience Retail Asia, operator of Circle K convenience stores and Saint Honore cake shops, yesterday reported a 7.4 per cent year-on-year growth in turnover, although its bottom line came under pressure.

Excluding a one-off gain from the disposal of a property last year, its interim net profit dropped 7.7 per cent to HK$60.1 million from the same period last year. This was due mainly to rising store operational expenses from high rents and labour costs.

Nearly half of the company's Saint Honore stores were opened less than a year ago, as the company experiments with on-site bakery and cafe-style seating.

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"Although we had to deal with a number of external challenges in the first half of the year, we are encouraged by the sales growth momentum for comparable stores," chief executive Richard Yeung Lap-bun said. "We are also very pleased with the launch of FingerShopping.com which we believe will help us capitalise on the growing trend of multi-channel shopping and expand the scope of our convenience stores."
Announced in June, Fingershopping.com is an online shopping platform that allows consumers to pay for and then pick up merchandise at Circle K stores. Weak consumer sentiment stemming from a slowdown in the mainland economy is expected to continue into the second half.
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Despite the difficult operating environment, CRA said it would continue to expand in Hong Kong. "We currently have 594 stores but expect to grow up to 610 or 620 by the end of 2013. That's a conservative estimate because the rents are still high. We will be closing around 10 stores but opening in 30 to 35 locations," Yeung said.

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