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We review Sun Art's FY2017 results, its growth forecasts for the next five years, plus progress against key strategic objectives.
Germany’s Metro has shortlisted eight companies for its China business, a deal valued at between US$1.5bn and US$2bn as previously reported.
Alibaba Group announced financial results for the quarter ended 31st March 2019.
The group reported strong performance for the quarter. Daniel Zhang, Chief Executive Officer of Alibaba Group commented that “Alibaba is becoming synonymous with everyday consumption in China, growing our base to 654 million annual active consumers and extending our penetration in less-developed cities. Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth.”
Top line figures for the quarter ended 31st March 2019 are:
Highlights of the group’s business and strategic updates are summarised below.
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Following on from the announcement of its results, Sun Art has said its chief executive, Ludovic Holinier had resigned from his role. The retailer said Holinier will be replaced by Ming-Tuan Huang.
At the moment, Huang is chairman of RT-Mart and is responsible for the overall strategic planning and management of the Group. He has also been CEO of RT-Mart Limited Shanghai where he is responsible for devising and implementing its overall strategies and the supervision of its business operations.
According to the press release announcing the change in management “The appointment of Mr Huang as the new general manager clearly shows the group's determination and confidence to revitalise its hypermarket and popularise New Retail.”
One of Huang’s first responsibilities will be in implementing the creation of a single joint headquarters for RT-Mart and Auchan, which was announced in December 2018. The step will also see RT-Mart assist Auchan in upgrading its IT system and the supply chain as the two banners are integrated. However, the two companies are not being merged, with the step focused on ‘ improving the use of technology and management… with the purpose of enhancing efficiency of the Group.
China’s major hypermarket operator Sun Art Retail Group Ltd, set up by Auchan and Ruentex and backed up by Alibaba, reported a 7.3% fall in 2018 profit.
The retailer reported its net profit fell to RMB2.59bn (US$386m) from RMB2.79bn (US$386m). This was below the expected RMB2.70bn. Turnover fell by 2.9% to RMB99.36bn and same-store sales fell 1.72% year-on-year. The group’s gross profit margin increased by 1.2 percentage point from last year to 25.3%.
The company, operating under the “RT-Mart” and “Auchan” banners, says that the competition is fierce including online. "2018 was a year where the digitalization of our retail business began, and also a year to plan future development," the company said in a statement. "Through digital management, supply will be closely tied with demand to provide customers with the right product offering, good prices..."
Just one day after publishing its 2018 results, Sun Art announced plan to open 25 more stores in China this year, aiming to return to positive growth in 2019.
Sun Art has posted a 0.3% decline in sales revenue to CNY52.1bn (US$7.6bn) for the first six months ending 30 June 2018.
For the first half, Sun Art recorded a modest 0.8% increase in profit to CNY1.9bn (US$278.1m), while same store sales growth fell 1.6% compared to -0.9% for the same period last year. This was attributed to increased competition, which has been diversifying how customers shop and therefore impacting the performance of Sun Art's hypermarkets. Growth for the retailer in 2017 also slowed down compared to previous years.
The Group opened 11 new hypermarkets under the RT-Mart banner during the reported period. Five of the new stores were opened in the eastern part of China, two in the north, three in central and one in the south. As of 30 June 2018, it had a total of 472 hypermarkets in China with a total gross floor area of approximately 12.7m sq m. Approximately 8% of the Group’s stores are in first-tier cities, 17% in second, 45% in third, 22% in fourth and 8% in fifth. The Group has identified and secured 56 sites to open new hypermarket stores, of which 48 were under construction.
Following the strategic alliance with Alibaba, Sun Art has launched several initiatives. It is also introducing, for example, popular online items in its hypermarkets to provide customers with greater choice. The retailer is committed to accelerating the integration between offline and online to allow customers to switch and shop freely in accordance to their needs.
Sun Art will continue to look for ways to understand its customers better, using technology and data to make it easier and more convenient for them to shop. It is planning to extend the O2O coverage of its brick-and-mortar stores; from a three-kilometre radius that its stores currently service to more than three (but potentially up ten) times the size in the future.
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