2006 Sep 15
AEON Stores (Hong Kong)

AEON STORES REPORTS 2006 INTERIM RESULTS　ACHIEVES STEADY BUSINESS GROWTH

(HONG KONG, 15 September 2006) - AEON Stores (Hong Kong) Co., Limited ("AEON Stores" or the "Company") (Stock code: 984) and its subsidiaries (the "Group") today announced its unaudited interim results for the six months ended 30 June 2006, reporting steady business growth.

The Group's turnover rose 9% to HK$2,831 million for the six months ended 30 June 2006 against HK$2,606 million for the corresponding period last year. The rise in turnover is mainly attributable to the increase in sales of its existing and newly opened stores. Affected by a stock clearance and its enlarged food sector to meet customer needs, gross profit margin slightly decreased from 24.8% in the same period last year to 23.9%. Profit attributable to shareholders was HK$28 million (2005: HK$37 million). The decrease in profit was due to rise in rental expenses in Hong Kong as well as increase in operating expenses of AEON (China) Co., Ltd. ("AEON China").

The Board of Directors has recommended the payment of an interim dividend of 5.5 HK cents (2005: 5.5 HK cents).

During the review period, staff cost against turnover increased from 8.2% to 8.4% while rental cost against turnover fell from 8.0% to 7.9%. The Group maintained a stable net cash position with cash and bank balance of HK$1,124 million as at 30 June 2006 (31 December 2005: HK$1,042 million).

Mr. Lam Man Tin, Managing Director of AEON Stores, said, "We are pleased that our business achieved steady growth in the first half of 2006. Despite the growing local economy, falling unemployment rate and increasing salary level, rounds of interest rate rise have convinced local consumers that they should spend cautiously. Nevertheless, with improved merchandise mix, quality customer services and enhanced shopping environment, we managed to counter consumers' hesitance in spending and deliver satisfactory results."

The Group's Hong Kong turnover rose slightly by 5% to HK$1,904 million (2005: HK$1,822 million). Profit before tax for the period dropped 15% to HK$45 million from HK$53 million, mainly as a result of rising rental expenses, even though the rise was not as steep as market rate. In April 2006, the Group partially closed the Whampoa Store for renovation and it resumed operation in late June. With various sections enlarged, the renovated store adopts the "Healthy Living" concept and is able to provide customers with a convenient one-stop shopping environment. On the other hand, encouraged by the successful experience of the first JUSCO Supermarket in apm, Kwun Tong, the Group has been exploring suitable locations to expand the network for this new business model.

Turnover from PRC operations was up 18% to HK$928 million compared with HK$784 million for the same period in 2005. The growth in turnover was attributable to satisfactory growth in existing stores and new stores. It takes time, however, for the new stores to adapt to local needs before they can generate considerable contributions. Furthermore, AEON China is still in its investment stage. Under these circumstances, the Group's PRC operations managed to achieve HK$2 million in profit before tax for the period (2005: loss HK$2 million). As for the shopping mall in Shunde under AEON China, opening has been postponed from the second half of 2006 to the first half of 2007 due to construction delay.

Looking ahead, putting JUSCO Supermarket in highly populated residential areas or commercial districts not covered by its GMS network will be part of the Group's business development strategy. The Group has opened the second JUSCO Supermarket in Lam Tin in early September and will open another one in Tokwawan by mid-2007. In addition, the Group opened one JUSCO $10 Plaza in Fanling in August, and another JUSCO $10 Plaza will be opened in Shamshuipo by the end of September 2006 to further extend its sales network.

In the PRC, the Group expects the economies in South China to continue to prosper, which will benefit its existing stores and new stores. To capture the lucrative opportunities ahead, AEON China will open a shopping mall in Shunde, Guangdong Province in the first half of 2007.

"We are cautiously optimistic about the Hong Kong economy and expects it to grow steadily. In view of this, we will actively pursue our expansion plan and look for suitable locations in Hong Kong to open more GMS, JUSCO $10 Plaza, and especially JUSCO Supermarket which takes up relatively smaller space and makes finding suitable locations easier. Moreover, we will continue to look for suitable locations in South China for opening retail outlets which will allow us to capture the enormous opportunities in the PRC market," concluded Mr. Lam.

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About AEON Stores
AEON Stores was established in Hong Kong in 1985 and listed on the Hong Kong Stock Exchange in 1994. The Group is mainly engaged in the operation of general merchandise stores (GMS). Currently, it operates 10 GMS, 2 independent supermarkets, 33 independent Living PLAZA by AEON, 30 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 3 KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 15 independent supermarkets in Guangdong Province, the PRC.

For more information：
AEON Stores (Hong Kong) Co., Limited
Corporate Communication Department
Tel.：（852）2165 0777
Email：aeonpr@aeonstores.com.hk