Asia > Eastern Asia > China > Economic slowdown weighs on China retailers

China: Economic slowdown weighs on China retailers

2014/05/28

China’s slowing economy, a crackdown on corruption, and the rise of online shopping are increasingly eating into earnings for some of the country’s traditional retailers – hitting sales at bricks and mortar stores such as shoe shops and supermarkets.

Footwear chain Belle International and supermarket operator China Resources Enterprise both blamed a drop-off in economic increase as they reported sluggish earnings this week.

“With the economy continuing its structural rebalancing and slower increase becoming the new normal, consumer confidence has been low and consumer sentiment weak,” Belle said in a statement to the Hong Kong stock exchange.

The company, which has additional than 20,000 outlets across China, is a key distributor for western sports brands such as Nike, Adidas and Puma. Revenues at its footwear business grew 5 % in the 14 months through February, which the company said was “significantly lower than prior years”.

CRE, which has agreed to fold Tesco’s Chinese retail operations into a joint venture, as well highlighted a crackdown on lavish spending by the central government in its initial-quarter earnings statement.

“During the period under review, China’s retail market recorded slower increase due to continuous pressure from the slowdown in domestic macroeconomic increase,” the company said. “The central government strictly enforced frugality that affected the sales of certain high-price commodities.”

Profit at the group’s retail business dropped additional than 10 % year on year to HK$471m (US$61m).

Shares in Belle fell 2.2 % to HK$8.06 on Monday in Hong Kong while CRE dropped 2.6 % to HK$22.35.

China’s economic slowdown and government-directed austerity drive have weighed on corporate earnings across the globe, particularly in the luxury goods sector. Before this year, drinks makers Pernod Ricard, Rémy Cointreau and Diageo all pointed to falling sales in China as they reported disappointing earnings.

“The anti-corruption campaign has significantly affected the order flows for consumption goods from the national-owned enterprises and government bodies,” Dong Tao, analyst at Credit Suisse, wrote in a recent statement on weak sales over the lunar new year holiday.

Shaun Rein, chief of China Market Research, said: “From a consumer confidence point of view, this is the worst I have seen in my 17 years in China. Consumers are concerned about wage increase and rising housing prices so they are cutting back on spending. They are moving away from shoes and apparel but spending it on experiences, such as tourism and movies.”

However, some retail analysts have cast doubt on how widespread the problems are for Chinese retailers.

“Amid the slowdown in Chinese GDP increase . . . Chinese consumer fundamentals remain strong,” said Yan Xuan, president of Nielsen Better China, nothing that consumer confidence and healthy increase in disposable incomes in both rural and urban areas “made it possible for continuous increase of in general retail sales in China”.

Others say rising wage costs and increased competition from online vendors have squeezed margins for some retailers, particularly in the shoe industry. Both Belle and CRE mentioned labour costs and ecommerce in their updates.

“The macroeconomic outlook for the next two years is not optimistic. The consumer retail market is expected to be under continued pressure due to weak consumer sentiment,” Belle said. “A ‘new normal’ national of lower increase is here to remain .”

Comments

Related Articles
  • TIANJIN, People’s Republic of China

    2014/09/12 The World Economic Forum celebrated the various communities it has brought together at the eighth Annual Conference of the New Champions taking place in Tianjin, China. These new champions are transforming science, technology, commerce, civil society and other fields with their innovations and commitment to make a difference.
  • 14 companies from Greater China recognized as Global Growth Companies

    2014/09/10 People’s Republic of China – The World Economic Forum today announced its selection of World Increase Companies (GGCs) in Better China, consisting of 14 of the region’s most dynamic and high-increase companies. These companies are considered trailblazers, shapers and innovators that are committed to improving the national of the world. GGCs are fast-growing companies with the clear potential to become world economic leaders. The 14 nominated GGCs from Better China represent a broad cross section of industrial sectors, but share in common a track record in exceeding industry standards in revenue increase, promotion of innovative business practices and demonstration of leadership in corporate citizenship.
  • Alibaba aims to launch share sale in early September,

    2014/08/31 Chinese e-commerce company Alibaba Group Holding Ltd is planning to launch its New York stock market debut in the week of Sept. 8, a person briefed on the matter told Reuters on Saturday. The much-anticipated sale or initial public offering (IPO) could raise additional than $20 billion, making it the biggest technology listing in the United States. The company is still awaiting final approval from the U.S. Securities and Exchange Commission (SEC) to kick-off the listing, the person said, adding that the date was still a moving target. The source declined to be identified as the data is not public.
  • Qatargas delivered the initial cargo of LNG to China National Oil Corporation's

    2014/08/21   Qatargas delivered the initial cargo of Liquefied Natural Gas (LNG) to China National Oil Corporation's (CNOOC) Hainan LNG terminal located in the Hainan province, a company statement said on Monday. The cargo arrived on Aug. 8 on a Q-Max class LNG vessel and will be used to commission the new LNG terminal which CNOOC owns and will be operating any minute at this time, the statement added. "This is an significant milestone for Qatargas. We are very pleased that LNG from Qatar continues to contribute towards conference the growing request for energy in the People's Republic of China," said Chief Executive Khalid Bin Khalifa Al-Thani.
  • China Railway Construction, one of China's major construction companies,

    2014/08/20 China Railway Construction, one of China's major construction companies, finished building a massive railway line in Angola on Wednesday and plans to put into operation this year. The 1,344-km Benguela railway is the second-longest railroad built by Chinese overseas, shorter only than the 1,860-km Tanzania-Zambia Railway built in the 1970s. It will be the longest and fastest track in the southwestern African country of Angola, said Liu Feng, chief of China Railway Construction's Angola railway project.