2006 Mar 24
AEON Stores (Hong Kong)

AEON STORES REPORTS 2005 ANNUAL RESULTS　 PROFIT SURGED REMARKABLY BY 57%

(HONG KONG, 24 March 2006) - AEON Stores (Hong Kong) Co., Limited ("AEON Stores" or the "Company") (Stock code: 984) and its subsidiaries (the "Group") today announced the audited results for the first full year after its change of financial year end date in 2004. Turnover for the year ended 31 December 2005 grew 38% to HK$5,503 million (10 months ended 31 December 2004: HK$3,981 million). Profit attributable to shareholders increased 57% to HK$125 million (10 months ended 31 December 2004: HK$79 million). Earnings per share were 47.9 HK cents (10 months ended 31 December 2004: 30.56 HK cents).

The Board of Directors proposed the payment of a final dividend of 14.0 HK cents (10 months ended 31 December 2004: 8.5 HK cents) per share. The total dividend for the period will be 19.5 HK cents (10 months ended 31 December 2004: 12.5 HK cents), including an interim dividend of 5.5 HK cents paid earlier.

Gross margin slightly decreased from 26.1% to 25.2% as the Group enlarged its food sector that poses a lower margin in response to the changing customer needs.

Staff costs and rental costs against turnover were at 8.2% and 7.0% (10 months ended 31 December 2004: 8.8% and 7.9%) respectively.

At the year end, the Group maintained a net cash position with cash and bank balances of HK$1,042 million (31 December 2004: HK$776 million) and short-term bank loans of HK$14 million (31 December 2004: Nil).

Mr. Naoyuki Miyashita, Managing Director of AEON Stores, said, "I am most pleased to report that we have achieved record financial results last year. The reviving property market and increasing salary level propelled overall growth of the local economy during 2005. Consumer sentiment picked up for the retail markets in Hong Kong, and was also strong in the flourishing PRC. Promising economic indicators encouraged consumers to purchase a greater variety of quality merchandise, which in turn gave the retail sector a strong boost and braced AEON Stores' growth momentum. Being able to answer to this consumption trend with improved merchandising, quality customer services and enhanced shopping environment, the Group achieved remarkable performance."

The Group's sales in Hong Kong were HK$3,836 million (10 months ended 31 December 2004: HK$2,878 million), up 33%, while net profit rose 90% to HK$138 million (10 months ended 31 December 2004: HK$72 million). During the year, the first JUSCO Supermarket opened in April 2005 in apm, Kwun Tong. It was a new operational model that detached the supermarket from our GMS. In addition, the Group further strengthened the JUSCO $10 Plaza network with the opening of two outlets in Tsuen Wan and Wan Chai during the year, bringing the total number of JUSCO $10 Plaza to nine. Meanwhile, the GMS in Tai Po underwent a two-month renovation and re-opened in August 2005. Also, TOPVALU, our in-house brand of quality and good-value products, continued to play a key role in our success.

The Group's operations in the PRC reported sales totaled HK$1,667 million, an increase of 51% as compared with that of the ten months last year. It was attributable to the full-period operation of the East Lake Store, the opening of the Dragon Hill Store and sales growth of existing stores.

During the year, AEON (China) Co., Limited ("AEON China") actively prepared to realise the Group's plans for the market, including developing a shopping mall with a new GMS in Shunde, Guangdong Province. As it was still in the investment stage, resources were allocated to AEON China to fortify business foundation. On the other hand, the newly established stores, which the Group strategically put at locations farther from city centres yet laden with potential, were also in the teething stage. These two factors collectively caused the PRC operations to post a net loss of HK$14 million (10 months ended 31 December 2004: HK$10 million profit).

Looking ahead, the Group remains positive about Hong Kong's retail market. Recent studies showed that with Hong Kong's unemployment rate lowering, its property market recovering, healthy inflation and the city continuing to offer the world's freest market conditions, public confidence in the economy is returning. Local people are rediscovering the joy of shopping. At the same time, Hong Kong's reputation as Asia's shoppers' paradise and dining capital continues to draw an ever-growing influx of tourists, especially individual travellers from the PRC. These factors will accelerate consumer spending and further invigorate Hong Kong's retail market.

The Group will continue to find suitable locations with high consumer traffic for opening more GMS, JUSCO $10 Plaza and independent supermarket. We will also actively enhance our existing stores to present a shopping environment that fits the needs of customers in respective districts. In the meantime, our supermarkets will continue to offer a unique blend of fresh foods and varieties of commodities including distinctive goods and delicatessens. The Group will also organise more campaigns to promote goods and foods of different cultural roots or countries and thematic events to please the palate of diverse customers and match market changes.

In the PRC, the Group will focus on creating in its stores an environment that promises convenience and comfort to all customers regardless of their age or gender. It will continue to look for suitable locations to open new stores, aiming at capturing the new class of affluent shoppers with one-stop shopping services in the consumption-power-boosted PRC.

The Group sees full-scale shopping malls assuming importance in the PRC retail market as urbanisation continues to progress rapidly, population shifts, consumer purchasing habits change, and more families own cars. Under AEON China, the Group will set up a new shopping mall employing a new operational model in Shunde, Guangdong Province, by the end of 2006. When it is open, it is expected to become a leisure hotspot in Shunde, where local people can enjoy one-stop shopping convenience and great shopping experiences. With a strengthening grip on the market backed by our proven business models, experience and dedication to be the best in the retail industry, AEON Stores is poised to capture the immense potential in the southern China retail market.

"In addition to pursuing business expansion and quality excellence, we put forward our business principle 'everything we do, we do for our customers', we are confident that we can add great value to the every life of our customers, realising not only our tradition, but also our mission," concluded Mr. Miyashita.

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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 retail businesses (General Merchandise Stores and Independent Supermarkets). Currently, it operates 10 GMS, 2 independent supermarkets, 31 independent Living PLAZA by AEON, 31 independent Daiso Japan, 4 Mono Mono, 4 KOMEDA'S Coffee and 1 JELYCO DO By KOMEDA'S Coffee in densely populated districts in Hong Kong. It also operates 21 GMS and 17 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