Chinese Wumart dealing with rising costs, tough competition

Chinese Wumart dealing with rising costs, tough competition

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One of the biggest supermarket chains in China, Wumart Stores Inc. – regardless of a booming retail market – reported its first ever decrease in full-year net profit in over six years. The company managed to reach sales of 18.9 billion yuan in 2013, which marked an increase of 9 percent, but its net retail profit decreased 23.7 percent, to 459 million yuan which is the first decrease since 2008.

wumart

The company named the consolidation, as well as restructuring of the store network in the past year as the reasons behind the decline, driven by rising rents, as well as operating costs. In 2013, the Beijing-based Wumart closed at least 52 stores of various types. The company shut down outlets where leases were expiring or those stores which were not performing well.

The general manager of Kantar Worldpanel, Jason Yu said, “Wumart shares were flat over the past two years. But the decline in profit was probably more related to increased operating costs in terms of rent, logistics and labor, since the company failed to grow faster than the market”. Yu went on to say that the fact that Wumart remains a regional player, with most of its sales coming from North of China and a limited presence in the East region affects its performance in the market.

In 2013, Wumart dropped its plans to acquire stores and an equity stake from the rival C.P. Lotus Corp.

Photo Credits: SCMP