Parkson Retail Group Ltd, the mainland's largest department store chain, hopes to add six stores annually across the mainland for the next three years to ride growth in Asia's second-largest retail market.

More than 10 percent annual expansion on the mainland's $84 billion department store arena will help Parkson, an arm of Malaysia's Lion Group, sustain growth in same-store sales an important industry benchmark at between 15 and 17 percent over the same period, a senior executive said.

But managing director Alfred Cheng warned that the industry though huge and growing remained fragmented and competition was intensifying as players in other segments from Wal-Mart Stores Inc to Carrefour SA pile in.

In mature markets such as the United States, the top 5 or 10 retailers command about 40 percent market share. In China that figure was less than 10 percent, with Parkson leading the fray with a 2 percent market share, Cheng said.

"The market is still highly fragmented," Cheng told in an interview yesterday. "We hope to add six stores on average per year, and as of now, we have announced the signing of five leases this year."

"That's a good balance," he added.

The five leases would go to Beijing, Shanghai, Chengdu and Xi'an cities in which Parkson already has stores and the affluent city of Hangzhou in East China.

Parkson unheard-of outside of Asia but a well-known operator of shopping malls in China and parts of Southeast Asia focuses on ladies' fashion and cosmetics and targets the mid- to high-end market.

It operates 25 self-owned stores, 11 managed stores, and two "Xtra" branded supercentres, which also sell household and electrical goods as well as groceries.

The firm's expansion will be funded by 3 billion yuan ($387.5 million) cash on hand, and a recent $200 million bond issue, Cheng said, and the acquisitions would be re-branded as Parkson stores.

"Fifteen to 17 percent same-store sales growth for the next two to three years is still sustainable," he said.

Parkson earlier reported an 86 percent leap in 2006 net profit, to 460.8 million yuan ($59.5 million). That was built on 17.1 percent same-store sales growth, and by revenue contributions from 12 stores bought in the second half of 2005.

Now, the acquisitive firm is thinking of buying minority interests and smaller non-chain rivals as it expands in China's consolidating retail industry, Cheng said without elaborating.

DBS Vickers Securities revised their Parkson earnings estimates up 10 percent to 649 million yuan for 2007, and 852 million yuan for 2008 following strong 2006 results.

Analysts predict the firm will benefit from proposed tax unification in China a statutory rate of 25 percent by 2008 and will benefit from gradual yuan appreciation.

Parkson shares ended down 0.82 percent at HK$48.25, outperforming the market's 1.8 percent slide.

The shares trade at a hefty premium 61.1 times forward earnings compared to 30.6 times for rival Lifestyle International Holdings Ltd and 22.2 times for Aeon Stores.

Reuters