Wumart Stores Inc, Beijing's largest supermarket chain, said
yesterday it has earmarked 500 million yuan (US$62.5 million) to
open more hypermarkets and take over competitors in 2006.
The move, announced after it posted strong first-half earnings
yesterday, aims to fend off foreign rivals and consolidate its
leadership of the mainland's highly competitive retail market,
But the war chest does not include the 550 million yuan
(US$68.75 million) spent on its two latest acquisitions this
Wumart announced the acquisitions of Beijing rival MerryMart in
February, while it took over Southwest China-based Xinhua Co in
"We will continue to expand and acquire," said Xu Ying, Wumart's
director of finance.
"Our goal is to become a leading hypermarket operator," she told
reporters yesterday. About 70 percent of Wumart's turnover comes
from its hypermarket stores.
Despite that ambition, the retailer, which trades its shares in
Hong Kong's secondary stock market, the Growth Enterprise Market,
will open 20 to 30 new community-based mini-marts in 2006, in a
move to diversify its store portfolio. It now operates 478
Running a total of 524 stores, the retailer has been basking in
the mainland's consumption boom in recent years.
Wumart, Shanghai-based Brilliance and Dalian-based Dashang
Group, are regarded as the local giants that can compete with
foreign players such as US retail behemoth Wal-Mart, France's
Carrefour and Germany's Metro.
It used to expand through organic growth, becoming one of the
few Chinese retailers to have a cross-province influence.
However, strong penetration by foreign retailers has forced
Wumart to conduct mergers and acquisitions, a quicker but more
capital-intensive way to grab a bigger market share.
It also seems to be an effective way to enter smaller cities,
where small-scale, local retailers have already occupied prime
areas for supermarkets, analysts said.
"I don't think Wumart will only focus on Beijing," said Lai
Wai-shing, an analyst at Hong Kong-based Hantec Investment. "It's
still hunting for acquisitions," he said.
Wumart yesterday posted a year-on-year 44.2 percent jump in its
net profit from January to June, to reach 108.9 million yuan
(US$13.6 million), slightly beating an earlier estimate made by
investment bank DBS.
With a "buy" recommendation on Wumart's shares, DBS predicted
its earnings would be 1.06 million yuan (US$13.25 million).
The retailer's turnover also experienced a sharp rise of 43.5
percent, on a yearly basis, to 2.62 billion yuan (US$327.5
million), thanks to the "opening of new stores and robust
same-store increases," it said in a statement.
Wumart's Hong Kong-traded shares were under pressure in the past
couple of weeks after the company delayed its acquisition process
Its shares sank 1.79 percent to HK$27.5 (US$3.5) yesterday but
are expected to rise today on handsome half-year results, which
were announced after the stock market's close.
(China Daily August 11, 2006)