Sun Art Retail : Adhere to the Multi-Format and Omni-Channel Development Strategy, Stay Helpful in Daily Life and Be Neighborly in Communities

[For Immediate Release]

Adhere to the multi-format and omni-channel development strategy

Stay helpful in daily life and be neighborly in communities

Financial Highlights

For comparison purpose, major indicators of the financial results for the twelve months ended 31 March 2022 and 31 March 2021 (unaudited) are summarized in the tables below:

For the twelve months ended 31 March

Business Highlights

• More than 70 hypermarkets were revamped, and the first pilot store of remodeling version 2.0 achieved initial success by focusing on "shopping, experience, services and social".
• By leveraging the "Big box" advantage of hypermarkets, the online business covering various channels maintained a double-digit growth, and the automation capabilities were further improved.
• The existing RT-Super model is basically practicable. With the accumulation of expansion sites, RT-Super is ready for further development.
• RT-Minihas accumulated experience in various store patterns. The gross profit of comparable stores has increased significantly and the loss has narrowed.

(24 May 2022 - Hong Kong) Sun Art Retail Group Limited ("Sun Art" or the "Group", HKEX stock

code: 6808), today announced its 2022 annual results for the twelve months ended 31 March.

Macro Environment and Industry

In 2021, the total retail sales of consumer goods increased by 12.5%, with the growth rate slowed down month by month. In March 2022, impacted by the pandemic, the total retail sales of consumer goods decreased by 3.5% year-on-year. Affected by the continuous low pork price in the past twelve months, the food consumer price index ("CPI") in 2021 and the first quarter of 2022 decreased by 1.4% and 3.1% respectively. The overall retail industry faced great challenges.

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Adhere to the multi-format and omni-channel development strategy Stay helpful in daily life and be neighborly in communities

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Revenue

In the post pandemic, the omni-channel competition of the retail industry has intensified. In the fall- winter season of 2021, the pandemic recurred and affected the Group's main store regions, impacting offline brick-and-mortar stores, and causing temporary shut down or shortened business hours of stores in many areas. During the reporting period, the Group's revenue reached RMB88,134 million, representing a growth rate of -5.3%.

During the reporting period, the same store sales growth rate ("SSSG"), which is calculated by sales of goods excluding household appliances, was -6.7%, mainly due to the decline in offline traffic caused by the pandemic recurrence in the second half of the fiscal year. During the pandemic period from March to April 2022, the Group actively responded to the call of the government to stabilize prices and ensure supplies. As a result, the SSSG achieved a low single-digit increase. If not taking into account the impacts of the pandemic in Shanghai and Jilin province, the SSSG would have achieved a double-digit growth in April 2022.

Gross Profit

As of 31 March 2022, the gross profit recorded RMB21,473 million, a decrease of RMB2,653 million over the same period, mainly due to the fact that the change in channel mix caused the change of sales gross margin. In addition, the decline in offline traffic and corresponding rental income during the pandemic also led to a decrease in gross profit.

Operating Profit

As of 31 March 2022, the Group recorded the operating profit of RMB18 million, a decrease of RMB3,586 million over the same period. During the reporting period, the Group recorded the provision totaling approximately RMB1,875 million, which was mainly attributable to the impairment losses of about RMB1,448 million, a special loss allowance of about RMB233 million and one-off provision for litigation. The operating profit recorded approximately RMB1,893 million after adding the provision.

If not taking into account the above-mentioned impacts, the Group's operating profit would still have a large gap compared with the past fiscal year, which is mainly due to the decline in offline revenue caused by pandemic impacts and the decline in gross margin caused by continuous impacts of channel mix, resulting in a decrease in both gross profit and operation profit.

Dividend

Despite the fact that the pandemic and the changes in customer's consumption impacted the retail industry and the Group's profit, the Group will adhere to the multi-format and omni-channel development strategy, and is full of confidence in sustainable growth and profitability in the future.

As of 31 March 2022, the Group's net cash recorded RMB18,659 million. Considering the Group's liquidity will remain sufficient according to actual and expected financial performance, and future working capital requirements, capital expenditures and future expansion plans will not have significant impacts on liquidity, the Board of Directors proposes to declare a final dividend of HK$0.045 per ordinary share. The final dividend is subject to the approval of the Group's shareholders at the forthcoming annual general meeting.

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Mr. Peter HUANG, Chairman of the Group commented, "The fiscal year 2022 is a year full of challenges. Although affected by the competition from community group buying, the recurrence of the pandemic and the slowdown of consumption growth, Sun Art Retail has endeavored to explore reform and innovation under the leadership of CEO Mr. Lin Xiaohai. Over the past year, Sun Art made a bold attempt on remodeling version 2.0 which transformed the hypermarket from the original transaction place into diversified scenarios that satisfy customers with shopping, experience, services and social. The performance after remodeling is better than expected. In addition to the in-depth development of offline business, Sun Art continues to facilitate and optimize the multi-format and omni-channel business model. Sun Art has always been a leader in terms of omni-channel business and fulfillment capabilities in the industry. I believe that with the concept of serving customers for more than 20 years, solid fundamental skills, and the layout of fresh product supply chain warehouse network and store-warehouse network, Sun Art will certainly provide customers with better products and services so as to confidently drive the revenue into the growth trajectory."

Become offline experience centers, the first remodeling version 2.0 store achieved initial success.

It took five months for the first remodeling version 2.0 store to re-open in December 2021. From the perspective of customers, the store focuses on the needs of the getting-old group and families with kids. At the same time, it focuses on product classification and upgrading, and creating large scenes and related displays. In addition, the Group continues to optimize the tenant structure of galleries and provide more diversified services so as to create a community neighborhood center. After the remodeling, the SSSG of the store stopped decreasing and rebounded in the second half of the fiscal year, achieving a double-digit growth.

The Group plans to facilitate the maneuverable and modular remodeling to other stores at a lower cost. In fiscal year 2023, the Group intends to launch the store remodeling version 2.0 in more than 50 stores.

Become online fulfillment centers, the online business improves steadily.

B2C business covers several online channels and provides home-delivery services to achieve the growth of B2C orders. During the reporting period, the average daily order per store ("DOPS") of B2C business exceeded 1,250, representing a double-digit growth over the same period in fiscal year 2021. The rapid growth of self-owned APP businesses has also laid a good foundation for the digital operation of customers in the future. In the second half of the fiscal year ended 31 March 2022, the Group further optimized the marketing and online operation capabilities, contributing to the ticket size of more than RMB70 per order, representing an increase of 6.5% over the same period in fiscal year 2021. The profit improved significantly compared with the first half of the fiscal year 2022.

Currently, more than 80% of the Group's hypermarket have installed the conveyor-belt system, and more than 200 stores have shared quick-picking warehouses covering various online channels. In this fiscal year, the Group also successfully undertook the main supply of Alibaba's community group buying.

By leveraging the "Big box" advantage of stores, the Group has realized and enhanced the store automation and digitalized fulfillment capabilities to support the business development covering various online channels. Over the years, the average daily order per store has always maintained a double-digit growth, and the ticket size has continued to increase, driving the Group to become the industry leader in terms of the online fulfillment capability.

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Facilitate the multi-format and omni-channel development. Superstore model is basically practicable and the mini store continues to be improved with different patterns.

As a low-cost extension of RT-Mart,RT-Super focuses more on core categories, product upgrading, optimization of product efficiency, and reduction of operation and investment costs. During the reporting period, the Group had nine superstores, including six existing superstores with basically practicable model. There are three new openings in the fiscal year. The Group will also accumulate sites quickly for further development. The Group will continue to explore the low- cost operation and investment model of superstores, and gradually reduce losses and achieve profitability.

The Group had 103 mini stores, with a new opening of 73 stores during the reporting period. The mini stores are mainly located in Nantong, Huai'an, Ma'anshan and surrounding cities. Through the accumulation and improvement in the past year, RT-Mini focuses on different patterns of stores. The complementary system of supply chain and product structure have also been further improved to support business development of RT-Mini. The gross profit of RT-Mini continues to improve and the loss of comparable stores has narrowed significantly. In fiscal year 2023, the Group expects to densify the footprints of mini stores in existing city clusters, and further develop community economy and online business of stores.

Strengthen fresh product supply chain capabilities to support the multi-format and omni-channel development strategy.

In this fiscal year, the Group realized the infrastructure layout of warehouse network and established buyer teams, laying a good foundation for fiscal year 2023.

In the future, the Group will accelerate the construction of diversified supply networks, such as near-fields,far-fields and wholesale markets. Combining the layout of fresh product supply chain warehouse networks in core regions nationwide and transport capabilities with multi-temperature layers, so as to achieve systematic and digitalized construction, enhance the integration of supply networks, warehouse networks and buyer organizations, and provide support for the multi-format and omni-channel development.

Mr. Kevin LIN, Chief Executive Officer of the Group concluded, "The fiscal year 2022 is a year full of challenges in the external environment. It is also a year of team construction and self- strengthen for Sun Art Retail. Thanks to the smooth succession and integration between the new and former management teams, a leadership team with high trust and tacit understanding has been shaped. During the pandemic, we actively organized employees to ensure and stabilize supplies so as to practice corporate social responsibilities. The market environment for fiscal year 2023 is still full of uncertainties. However, the Group has a healthy and abundant cash flow, as well as sufficient strengths and capabilities in the face of market challenges. We insist on quality, price, efficiency and service. We keep understanding and meeting customers' needs. We adhere to the multi-format and omni-channel development strategy. At the same time, the Group will also commit to establishing mid-long term environmental, social and governance ('ESG') goals, focusing on energy conservation and emission reduction, food safety, and advocating a healthy and green lifestyle. We believe that Sun Art Retail will certainly create values for customers who are pursuing a better life. Sun Art will become the good helper and neighbor in community daily life."

- End-

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About Sun Art Retail Group Limited

Sun Art is a leading retailer with hypermarket and fast-growinge-commerce businesses in China. Sun Art operates its business with hypermarkets, superstores and mini stores under RT-Mart,RT-Super and RT-Mini. As of 31 March 2022, Sun Art had a total of 490 hypermarkets, nine superstores and 103 mini stores in China with a total gross floor area ("GFA") of approximately 13.67 million square meters, covering 239 cities across 29 provinces, autonomous regions and municipalities. The Group has always been committed to providing high-quality shopping experience for customers with fresh and inexpensive commodities, comfortable and convenient environment, as well as lump-sum buying. The Group aims to become a good neighbor of communities and a trustworthy shopping representative of customers.

As of 31 March 2021, Taobao China Holding Limited ("Taobao China") directly or indirectly holds 78.70% of the issued share capital of Sun Art Retail Group Limited (the "Group") and therefore has

become the ultimate controlling shareholder of the Group. The two parties will integrate online and offline professional capabilities to jointly explore new retail development opportunities in China's retail industry.

Sun Art will focus on the three strategies of 'offline experience centers, online logistics fulfillment centers, and multi-format and omni-channel development', as well as the capability-building of fresh product processing centers, and to become a leader in digital transformation and a benchmarking enterprise for New Retail.

Enquiries:

Strategic Financial Relations Limited

sprg_sunart@sprg.com.hk

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