News Release

2004 Oct 21
AEON Stores (Hong Kong)

AEON STORES ANNOUNCES 2004 INTERIM RESULTS PROFIT SURGED 356% TO HK$26.7 MILLION   MAINTAINS CONTINUOUS GROWTH THROUGH EFFECTIVE OPERATING STRATEGIES AND EXPANDING PRC OPERATIONS

(HONG KONG, 21 October 2004) - AEON Stores (Hong Kong) Co., Limited ("AEON Stores" or the "Company") (Stock code: 984) and its subsidiaries (the "Group") today announced its interim results for the six months ended 31 August 2004.

During the period under review, the Group's turnover recorded an increase of 7.6% to HK$2,243 million when compared to the corresponding period in the previous year. Gross profit margin recorded at 25.6%. Profit attributable to shareholders increased tremendously by 356% to HK$26.7 million. This substantial growth was mainly attributable to the overall satisfactory performance of its stores in Hong Kong and the PRC.

The Board of Directors has recommended an interim dividend of 4.0 HK cents (2003: 1.0 HK cent).

The Group maintained a healthy financial position during the period with no bank borrowings and net cash balances of HK$626 million (29 February 2004: HK$832 million). Due to lower staff and rental cost ratios in the PRC, overall staff costs against turnover dropped from 9.5% to 9.1% while rental costs against turnover also fell from 8.8% to 8.4%.

Mr. Kazumasa Ishii, Managing Director of AEON Stores, said, "We are pleased to announce such an encouraging results to our shareholders. Benefiting from the reviving market sentiment in Hong Kong, the local retail market is back on track with customers more willing to spend. Besides, we renovated Tseung Kwan O Store to become a "new-concept" store. We enhanced product display and provided a better shopping environment for our customers. The shop was partially closed for 3 months and renovated based on survey findings of the needs and preferences of customers in Tseung Kwan O and neighbouring districts. With an expanded supermarket and a comprehensive children corner 'Kids Land', the renovated store was well received by our customers."

Sales in Hong Kong operations rose 1.8% to HK$1,631 million. Profit from operations increased 16.9% to HK$25.3 million. The slight sales increment was due to the closure of the Tsz Wan Shan Store in January 2004. The Group extended its JUSCO $10 Plaza by opening its fifth independent store in Tseung Kwan O in April 2004.

The Group's operations in the PRC also posted remarkable performance during the period. Sales increased 26.7% to HK$612 million. The Group's profit from operations in the PRC has successfully turned around from HK$13.0 million loss last year to a HK$12.7 million in profit during the period. The boost in sales was attributable to overall satisfactory performance of the stores in the PRC, smoother daily operations and increasing popularity of "JUSCO" brand in the PRC. The Zhongshan Store was in full operation during the period as compared to 2 months of operation in the corresponding period in 2003. Teem Plaza Store resumed full operation after renovation with a bigger supermarket to satisfy the needs of customers in Guangzhou.

Looking ahead, the Group will continue to locate suitable sites to open more GMS to further enhance its market share in Hong Kong. Extending the satisfactory results of our independent JUSCO $10 Plaza, the Group will open two new shops in North Point and Jordan in October and December 2004 respectively.

For PRC operations, benefited from the Closer Economic Partnership Arrangement (CEPA), the Group has been granted the permit in September 2004 to establish a wholly-owned subsidiary - AEON (China) Co., Ltd. ("AEON China") in Shenzhen, the PRC. "We believe that the establishment of AEON China will speed up our expansion plan, strengthen our backbone for merchandise sourcing, logistics support and development of information technology system for our operations, equipping us for entering the retail market laden with great potentials in the South China
Region," Mr. Ishii explained.

In addition, the Group opened its new GMS in Foshan in September 2004, not only bringing a new shopping experience to citizens of Foshan and nearby cities, but also further expanded the Group's GMS network in the South China Region to 7 stores. The Group also target to open a second GMS in Shenzhen by the end of 2004.

"With slight inflation reflected from the Consumer Price Index in August 2004, benefits from the PRC relaxing its restrictions on individual travellers to the territory and improving unemployment rate, the general outlook of local retail market is optimistic. On the other hand, strong consumption power and significant economic growth among cities in the Pearl River Delta will provide unlimited opportunities for the Group to explore and develop our business in the PRC. The Group will provide the best of our best for our customers, hence fulfilling our motto 'Everything we do, we do for our customers'," Mr. Ishii concluded.

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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, 30 independent Living PLAZA by AEON, 32 independent Daiso Japan, 1 independent Bento Express by AEON and 4 Mono Mono and 4 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

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