Hong Kong-listed retailer Lianhua Supermarket has grown first-half sales but increased costs and “fierce competition” drove down prices and hit profits.

Lianhua said total sales, including space expansion, were up 7% to CNY15.6bn in the six months. During the period, the group opened one hypermarket, 63 supermarkets and 85 convenience stores. The company, which operates stores on the Chinese mainland, said that same-store sales were up 3.72%, beating the consumer price index and suggesting that the group is increasing business in its core store portfolio.

Profitability came under pressure and operating profit was CNY320m, down from CNY417.3m in the comparable period of last year. The company said it aims to lower payroll expenses through the implementation of a new labour model designed to improve employee efficiency.

Gross profit, stripping out overheads such as payroll, tax and interest, increased thanks to the formation of a strategic alliance with suppliers, streamlining efforts and an improved product mix. Gross profit increased by 9.9% year on year to RMB2.2bn, the company revealed.