Beijing Jingkelong, a retail and wholesale operator on the mainland, expects its same store sales growth to slow down further in the second-half due to high inflation.

The company's same store sales growth for the first six months of this year fell to 9.5 percent, 4 percentage points lower than the 13.5 percent growth a year earlier. Chief financial officer Chen Limin expects that the growth will drop to 9 percent in the second half.

"The same store sales growth is mainly affected by the competition in the industry, the high consumer price index (CPI), the opening of new stores and also other uncertainties," Chen said.

The first-half net profits of Jingkelong jumped 34.4 percent to 76.36 million yuan and its overall revenue increased by 30.5 percent to 3.36 billion yuan. The company's retail business has risen by 18.3 percent and its wholesale business revenue achieved 43.9 percent growth.

Jingkelong's gross profit margin has also increased by 0.8 percentage point to 13.9 percent and its gross profit amounted to 468 million yuan, which was 38.5 percent higher than that of the same period last year.

Chairman Wei Tingzhan said the increase in gross profit margin was driven by self-operated fresh produce, better bargaining power with suppliers as volume purchased increase and continuous optimization of product mix.

The company's net gearing ratio has jumped from 37.4 percent to 54 percent, due to an increase of bank loans and other borrowing and acquisition of property, plant and equipment.

Wei said the company now has accumulated debts of 500 million yuan, in which 300 million yuan was related to Shoulian, another supermarket in Beijing that Jingkelong acquired in 2007.

Wei noted that the company has actively taken steps to improve the operation capability and profitability of Shoulian delegated stores, to integrate its business system with that of Jingkelong.

"We will continue to look for merger and acquisition opportunities with other supermarkets," Wei added.

Looking ahead, Wei said the company will open more stores in Beijing and its surrounding areas, and build up a brand-new wholesale distribution network in northern and eastern provinces and the Bohai Bay Economic Rim.

(HK Edition 08/19/2008 page2)