Hypermarket chain Sun Art Retail posts 22.7 pct rise in H1 net profit

Sun Art Retail Group Ltd , China's second-biggest hypermarket operator, posted a 22.7 percent rise in first-half net profit as gains from unused prepaid cards helped offset growing competition from e-commerce platforms.

Sun Art has said it may recognise more future gains from unused prepaid cards, but analysts caution this does not indicate fundamental improvements. The company has been slow in the race to go online, with its platform Feiniu being very small versus that of its internet giant competitors like China Resources and Wal-Mart Stores Inc in China.

The retailer has also been grappling with a slowing economy and increased offline competition in cities ranked as lower tier where the bulk of its stores are focused.

Sun Art, a joint venture between Taiwanese conglomerate Ruentex Group and French retailer Groupe Auchan SA, posted a net profit of 1.76 billion yuan ($263.63 million) for the first half, versus 1.43 billion yuan profit a year ago.

Sun Art saw first-half turnover rise to 54.1 billion yuan from 52.9 billion yuan a year earlier. Gross profit margin increased 0.5 percentage points from a year ago to 23.3 percent.

"The increase was primarily attributable to continued business expansion of the Group with the opening of new stores," it said in a filing to the Hong Kong bourse on Wednesday.

Same-store sales fell 0.9 percent during the first half, compared with a 0.3 percent decline a year ago. It opened two new stores during the period, bringing its total number of stores to 446.

Income from unutilised prepaid cards totalled at about 460 million yuan as of end-June, Sun Art said.

Last month, the hypermarket operator said it expected to post a sharp rise in first-half net profit, thanks to unused balances on prepaid cards issued before June 30, 2012. Many Chinese buy pre-paid cards as gifts.

($1 = 6.6760 Chinese yuan renminbi)