Aeon Hong Kong to invest in new stores

Aeon Hong Kong is ramping up its store network expansion in the territory and the mainland.

The Japanese retailer’s locally listed subsidiary has set aside HK$420 million to build new stores and refurbish existing ones, MD Christine Chan Pui Man said in announcing the company’s half year result. The cash – vastly more than the $51 million spent in the first half of this year – will be spent during the second half of 2015 and in 2016.

Chan said despite a “stagnant” retail industry in both China and Hong Kong, the group improved its sales by 2.4 per cent to $4.499 billion in the six months to June 30, largely from stable growth in the mainland. Gross margin rose from 30.6 per cent to 31.1 per cent due to merchandise enhancement, boosting the core business profit by 20.8 per cent to $43.7 million.

In the first half of this year Aeon Hong Kong opened four new stores – two in Tsuen Wan, one in Sai Ying Pun and another in Sham Shui Po, giving it a network of 46 on June 30.

Revenue from the group’s Hong Kong operations was maintained at HK$1.87 billion, down marginally on a year ago, but profit fell from $44.7 million to $23.6 million.

On the mainland, revenue rose by 6.8 per cent to $2.626 billion and the segment results achieved a turnaround with profit of $20.2 million compared with a loss of $8.4 million last year. Aeon now has 29 stores in south China, no more than at the end of last year.

With a focus on now expanding the network, Aeon Hong Kong believes the mainland will become a major growth driver of the group.

“In spite of the unstable macroeconomic environment and the volatile stock market, the PRC is still one of the economies with the largest potential for further business growth,” Chan said.

In the second half of 2015, a new store will open in Zhongshan and in the first half of 2016, one will open in Panyu and two in Guangzhou and Shenzhen respectively in the second half.