Weakening economic growth has led to profit fall at hypermarket operator China Resources Enterprise (CRE).
CRE said net profit during the first half of the year has declined 11.1 per cent to HK$1 billion (US$129 million).
The company, which operates 4400 stores in China including the Vanguard supermarket chain, blamed ongoing fluctuations in the financial markets and slower economic growth in China for the result.
It expects the volatile economy to continue to affect its second half performance, however it is optimistic about its prospects.
The company also confirmed it is bidding for Hong Kong supermarket chain ParknShop which is for sale for $4 billion.
CRE’s share of China’s hypermarket sector will expand should it win ParknShop.
“The potential deal can make CRE the biggest player in the Hong Kong market, while at the same time CRE can, through ParknShop’s sourcing network, introduce high-quality products into the mainland, in particular consumers are highly concern about food quality and safety,” said Linus Yip, chief strategist at First Shanghai Securities.
The company has also formed a joint venture with British retailer Tesco to accelerate growth and fend off competition from leading hypermarket player Sun Art Retail Group.
The JV will combine CRE’s 2986 Vanguard stores across China and Hong Kong and Tesco’s 131 stores in China.
Tesco, like its foreign peers including Carrefour, has been struggling in China due to cut-throat competition with local players.
CRE’s chairman Chen Lang said that the company will continue to pursue sustainable growth through steady expansion and strengthening core competitiveness.
Consultancy firm Euromonitor predicts that China’s hypermarket industry will grow from an estimated 659.6 billion yuan in 2013 to 863.8 billion yuan ($141 billion) in 2015.
