2011 Mar 19
AEON Stores (Hong Kong)

AEON STORES ANNOUNCES 2010 ANNUAL RESULTS PROFIT ATTRIBUTABLE TO SHAREHOLDERS SURGED 67% TO HK$279.2 MILLION　PRC OPERATIONS BECOME KEY DRIVER OF REVENUE AND PROFIT GROWTH

(HONG KONG, 18 March 2011) – AEON Stores (Hong Kong) Co., Limited ("AEON Stores" or the "Group") (Stock code: 984) today announced its annual results for the year ended 31 December 2010.

During the year under review, the Group's revenue recorded a 4% increase to HK$6,106.5 million from HK$5,897.9 million in 2009, mainly attributable to the newly opened stores during the year in both Hong Kong and the PRC. Gross profit margin improved from 33.1% to 33.3%, due to economies of scale in procurement as the number of stores increased. Thanks to the strong sales performance and improved gross profit margin, profit attributable to shareholders surged 67% to HK279.2 million (2009: HK$167.1 million). The growth was also partly due to the dragging down of the previous year's performance by the one-off impairment loss arising from certain refundable prepaid rentals not being accepted in arbitration. Earnings per share were 107.39 HK cents (2009: 64.29 HK cents).

The Board of Directors recommended payment of a final dividend of 31.6 HK cents (2009: 22.6 HK cents) per share. Together with the interim dividend of 22.1 HK cents (2009: 9.6 HK cents) already paid, the total dividend for the year will amount to 53.7 HK cents (2009: 32.2 HK cents) per share.

During the year, staff cost to revenue rose slightly from 10.3% to 10.5%, mainly due to retention of manpower despite store closures. Rental cost to revenue improved from 11.1% to 10.2% thanks to efforts devoted in negotiating favourable terms with landlords. As at 31 December 2010, the Group maintained a strong net cash position with cash and bank balance of HK$2,168 million (2009: HK$1,904 million) and the bank borrowings was further reduced to HK$47 million (2009: HK$170 million).

Mr. Lam Man Tin, Managing Director of AEON Stores, said, "The global economy has been reviving during 2010 from the downturn brought on by the financial crisis in late 2008. Benefited from the improving operating environment for the retail business sector with positive consumer sentiment, in addition to customers' strong support to our new and existing stores in Hong Kong and the PRC, we are pleased to have achieved satisfactory results in 2010."

The Hong Kong economy has been ahead of the positive trend of the global economic recovery. Declining unemployment rate and rising labour income level further supported the economic expansion. The Group's Hong Kong operations recorded revenue of HK$3,189.8 million (2009: HK$3,271.3 million). The results were satisfactory given that the Tai Po Store was closed in July 2010 due to expiry of the leasing contract while the Lok Fu Store was closed in February and relocated to MegaBox, Kowloon Bay in June. Segmental profit was HK$232.3 million (2009: HK$265.9 million), temporarily affected by the retention of staff after store closures.

Active in expanding its sales distribution network, the Group opened three JUSCO $10 Plaza in Tsim Sha Tsui, Ngau Tau Kok and Tuen Mun during the year which were well-received by customers. The Group also relocated the General Merchandise Store ("GMS") in Lok Fu to MegaBox, Kowloon Bay. The new store, which became the Group's largest store in Kowloon East, was supported by the customers living and working in the district, thus delivering performance beyond the management's expectation.

The PRC economy was one of the first to rebound globally through the domestic demand stimulus policy and the south China region delivered strong economic growth in 2010. Under this favourable backdrop, the PRC operations recorded an 11% increase in revenue to HK$2,916.7 million (2009: HK$2,626.6 million), mainly attributable to the strong sales performance of existing stores and newly opened stores, despite that one GMS at China Plaza in Guangzhou was closed. The PRC operations achieved a segment profit at HK$153.7 million this year, a significant turnaround from a loss of HK$17.1 million last year. The segment would still record profit of HK$125.7 million if excluding the effect of changing the expected useful lives of building structures which saved HK$28 million from depreciation before tax during the year.

The new stores opened during the year - two GMS located in Guangzhou, Dongguan and two independent supermarkets in Shenzhen and Dongguan have been gaining consumers' support rapidly since operations, delivering performance above the management's expectation.

Looking ahead, the Group remains positive towards the outlook of the Hong Kong economy in 2011. To meet the higher consumer expectations on quality of daily necessities, the Group is planning to open new-style independent supermarkets with special interior décor that target customers looking for a wider range of high-end products - which not only can meet the appetite of different consumers, but also expand the Group’s revenue stream. The Group will also open a new GMS in Cheung Sha Wan by the end of 2011. Covering 240,000 sq.ft., it will become the second largest store in Hong Kong.

Separately, the Group has acquired a property in Hong Kong at a consideration of HK$310 million in January 2011. The property will be converted into the Group’s new headquarters and centralised distribution and processing facilities, with an aim to achieve overall cost reduction and efficiency enhancement.

As the PRC economy is expected to grow steadily, the Group is optimistic about the development of PRC operations against the growing domestic demand. The Group will expand its business network through actively opening new stores in locations with large potential, hence two independent supermarkets and three GMS will be opened in Guangzhou in 2011.

“Based on our strong and long-term relations with customers and well-established distribution network, the Group will continue to look for suitable locations for further business expansion and capture the emerging opportunities arising from the booming retail market, so as to achieve sustainable growth and maximize the returns for shareholders,” 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