New World Department Store China Limited ("NWDS" or the "Company"; Hong Kong stock code: 825), one of the largest owners and operators of department stores in the PRC, recently entered an agreement with an independent third party to manage and operate a new department store in Wuhan.
NWDS currently manages and operates four stores in Wuhan. The new department store is expected to commence operation in mid November 2007 with a total gross floor area ("GFA") of approximately 30,000 square metres ("sq.m."), which will enlarge the Company's operations in Wuhan in terms of GFA by 23% to nearly 160,000 sq.m. With the addition of this new store in Wuhan and the recently signed managed store in Beijing, the Company's portfolio in the PRC will reach 30 stores.
Commenting on the new store in Wuhan, Mr. Adrian Cheng, Executive Director of NWDS, said, "As one of the first foreign investors in the PRC retail sector, Wuhan is the place where we began our business. We are pleased to add one more store in the city where our brand has been well-established. The new store not only follows our growth strategy to expand in major cities, but also further strengthens our leading position in Wuhan. Going forward, we will continue to adopt a three-line strategy, by opening new stores in major cities, looking for value-enhancing acquisition opportunities and expanding our existing stores."
Mr. Philip Cheung, Managing Director and Executive Director of NWDS, added, "The new store is located in Wuchang district, the largest district in Wuhan. It is also our second store in the district. With an average disposable income per capita of RMB 12,000 in 2006, people in Wuchang are having strong purchasing power. The new store will definitely benefit from this strong market environment and follow the success of the first store."
Under the agreement, NWDS is commissioned to manage the new store for a three-year term and the Company has the unilateral right to extend the agreement upon the expiration of the original three-year term for a term of three years and a further term of three years upon expiry of the first extended term or for such other period as the Company considers appropriate up to and until the expiration of the lease of the store. In addition, similar to previous management consultancy agreements that the Company has entered with other business partners, NWDS has the right of first refusal to acquire the new store from the owner.