Parkson slides on slowest profit growth in 6 years

Parkson Retail Group Ltd. fell the most in eight months in Hong Kong trading, after the Beijing- based department-store chain posted the slowest profit growth in at least six years, missing analysts estimates.

Net income rose 8.3 percent to 911 million yuan ($133 million), Parkson said in a statement to Hong Kong s stock exchange today, missing the 955 million yuan average estimate of 11 analysts surveyed by Bloomberg. Parkson shares fell 6 percent to HK$11.18, the most in more than eight months.

Same-store sales growth slowed after China s economy expanded at its slowest pace in almost a decade in the first half of last year, the retailer controlled by Malaysia s Lion Group said. Economic growth momentum in mainland China started to pick up in the third and fourth quarters, it said.

Retail sales growth is recovering but it s not a huge leap, Nicolas Wang, an analyst at Daiwa Institute of Research Ltd. in Hong Kong said before the earnings announcement. Retailers have continued to offer discounts to spur consumer spending and Parkson is no exception.

Parkson s decline today, the most since June 2, reversed an earlier gain of as much as 4.5 percent and extends its slide this year to 18.3 percent. The benchmark Hang Seng Index has lost 6.8 percent this year.

Same-store sales growth slowed to 7.5 percent from 12.1 percent, the retailer said. Comparable sales strip out the effects of newly opened outlets.

The company added 11 percent to its retail space last year, missing a target of 15 percent after a delay in the opening of the Suntrans shopping mall in Beijing. Parkson said it plans to open the mall in the first half of this year.

Parkson plans to increase retail space in mainland China by 15 percent this year as it adds cosmetics and accessories brands to lure customers. The company, which opened its first store in Beijing in 1994, may add as many as six stores in the capital and other cities, Managing Director Alfred Cheng said Jan. 12.

Revenue rose 10.5 percent to 3.91 billion yuan in 2009, Parkson said. Earnings per share rose to 0.325 yuan from 0.3 yuan a year earlier.

The rebound in same-store sales growth won t be strong but is improving on a quarterly basis, said Daiwa s Wang, who recommends holding Parkson stock.

The company proposed a final dividend of 0.10 yuan a share, compared with 0.085 yuan a year earlier.

China s economy is on the right track to a sustainable recovery of its growth but the road for further recovery of its growth is expected to be bumpy and challenging, Parkson said in its statement today. Overcapacity in selected industries, asset bubble and worry on uncontrollable inflation will inevitably lead to adjustment in its fiscal policies and tightening of its monetary policies which will pose challenges and uncertainties.