1. Sun Art Retail to open fewer stores, shares drop after Alibaba denial

Sun Art Retail to open fewer stores, shares drop after Alibaba denial

Chief Executive Officer Bruno Mercier said it would slow the pace of store openings in response to competition from brick-and-mortar retailers, in the face of expanding e-commerce.

By: | Hong Kong | Updated: February 20, 2017 11:26 AM
Sun Art was in talks with Alibaba about the sale of supermarket chain RT-Mart. (AFP) Sun Art was in talks with Alibaba about the sale of supermarket chain RT-Mart. (AFP)

Sun Art Retail Group Ltd on Monday said it will open fewer stores this year after it dismissed media reports that it was discussing a supermarket sale with Alibaba Group Holdings Ltd, sending its shares down 18 percent. Chief Executive Officer Bruno Mercier said it would slow the pace of store openings in response to competition from brick-and-mortar retailers, in the face of expanding e-commerce. The comment came after the Chinese hypermarket operator said late on Friday it was in early talks with third parties including Suning Commerce Group Co Ltd about a potential tie-up. Alibaba was not part of those discussions.

Taiwanese media had reported that Sun Art was in talks with Alibaba about the sale of supermarket chain RT-Mart. Sun Art’s shares then fell as much as 18 percent on Monday. The stock had risen about 30 percent this year as of Friday, and traders said the dismissal triggered a long-expected bout of profit-taking. Sun Art however did say it could not rule out the possibility of co-operation with any significant online platform.

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E-COMMERCE COMPETITION

On Sunday, Sun Art posted a 5.2 percent rise in 2016 net profit as steady demand from smaller cities helped offset pressure from e-commerce. Sun Art, like rivals China Resources Co Ltd and Wal-Mart Stores Inc, has been grappling with e-commerce, a slowing economy and increased offline competition in smaller cities where the bulk of its stores are focused.

On Monday, CEO Mercier said in an earnings briefing that Sun Art, a joint venture between Taiwanese conglomerate Ruentex Group and French retailer Groupe Auchan SA, planned to open 30 to 35 hypermarkets this year compared with 38 in 2016. Nelson Hsu, chief financial officer of RT-Mart, also on Monday said no new hypermarkets would be opened in so-called fifth-tier cities in the next three years. Shares of Sun Art were down 13 percent at midday in Hong Kong, lagging a 0.3 percent gain in the benchmark Hang Seng share price index.

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