China-based retailer Sun Art Retail Group has announced results for the year ending 31 December 2015, with a 5% increase in revenue and a 15.7% fall in profit. The group plans to scale back its store expansion plan in China.
Like-for-like sales continue to drop
In the reporting period, Sun Art, a joint venture between French retailer Auchan and Taiwanese conglomerate Ruentex Group, posted revenue of RMB4,134m (US$630m) from sales of goods, up 4.6% from the previous year. The uplift in revenue was driven by the business expansion, including new store openings. However, LFL sales contracted 3.6%, due to the slower growth of the overall consumer market in China, as well as the intensified competition from other retail channels.
The hypermarket operator opened 38 new stores during the year, bringing its total to 409. Under the tough trading condition, the Group plans to adjust its new store opening target to 30 - 40 annually, from the original plan of 40 - 50 new stores in 2016.
Ecommerce brings challenges and opportunities
Sun Art has been developing its own ecommerce solutions since quite early on, compared to its rivals Wal-Mart and Carrefour. Its ecommerce platform Feiniu.com was launched in 2013, followed by an acquisition of FieldChina.com, an upscale online grocer in 2015.
The development of ecommerce, however, requires investment in technology and new staff that leads to a significant increase in operating costs. Meanwhile, Sun Art is facing severe competition from the county’s online giants, such as Alibaba and JD.com, who continue strengthening their dominance in the online grocery market.
Cheng Chuan-Tai, Sun Art Chairman, said “The pressure on offline retailers from the rapid growth in ecommerce platforms will persist for us. The group will continue to push for the development of its ecommerce business.”
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