Increasing competition and rising costs have impacted Chinese retailer Lianhua.

The company has reported its net profit fell 45.77 per cent to 340 million yuan in 2012.

It says it saw a modest turnover growth of 5.33 per cent to 28.99 billion yuan. Same store sales decreased by less than one per cent.

Turnover in the hypermarket segment increased by approximately 7.29 per cent to 17.25 billion yuan, which accounted for approximately 59.52 per cent of total turnover.

Its supermarket segment, which accounted for about 33.87 per cent of the group’s turnover, saw sales increase by about 2.1 per cent to 9.82 billion yuan.

Meanwhile, the convenience store segment responded actively to the competition; turnover reached 1.84 billion yuan, accounting for 6.34 per cent of the total sales.

“In 2012, the retail industry was operating in a complicated and volatile global economy,” said chairman Ma Xinsheng.

“Chinese retail chains were facing fierce competition and increasing costs. Meanwhile, rising awareness of food safety, tightened regulations on the chargeable fees on suppliers, and competition from e-commerce also pressured sales growth.”

This year, the retailer expects to face fierce peer competition and internal reforms. However, it remains optimistic due to the pace of growth of the Chinese economy. Also, the urbanisation and government policies to improve people’s wellbeing and stimulate consumption are also expected to become the main economic drivers of the retail market.