Slowdown blamed for weak results of retailers

Analysts divided on prospects, with some expecting more tough days before reboundRecent financial results from retailers provide further evidence, if any was needed, of the economic slowdown under way in the world's second-largest economy.迷你倉新蒲崗Concerns about the state of the economy have divided analysts into several camps, from those who foresee a bumpy but ultimately passable road, to those who spy an impending cliff. Last week's results appear to support the former camp, at least in the near term. While disappointing, the earnings were far from disastrous."The general economy is definitely slowing, so we expected weak results from retailers. Overall, personal income and GDP are growing slower than before," said BNP analyst Charlie Chen, who forecast a subdued economy for the second half of the year."I don't think it will continuously deteriorate but we expect to see growth of 10 to 12 per cent in the retail market in real terms, lower than the 15 to 20 per cent of several years ago."The companies that posted results included China Resources Enterprise, an operator of hypermarkets, chemists and the Pacific Coffee chain; Trinity, a retailer of luxury brands; and department store owner Golden Eagle Retail.While sales growth was generally positive, all the retailers saw their profits fall and margins shrink. They blamed price cutting and reduced customer traffic amid a toughening economic environment. They also cited rising labour costs and a recent anti-corruption clampdown for hurting sales of high-margin luxury goods and foodstuffs.The results reflect different corporate strategies. Operating on a 1.3 per cent net margin and reporting an 11 per cent fall in first-half profit, China Resources Enterprise is building market share acros迷你倉出租 multiple brands with limited depth in each. If successful, this might translate into higher profit margins in three to four years, Chen said.In the meantime, the firm needs to grapple with diverse sales and distribution models while controlling costs.By contrast, Sun Art Retail has focused on building just two hypermarket brands, RT-Mart and Auchan. Earlier this month, it posted a 14.4 per cent rise in profit, citing store openings, cost cutting and shop upgrades as the drivers of the improved results.Despite shrinking profit margins, retailers have continued to grow their store presence and brand range, both domestically and overseas.China Resources has confirmed its bid for ParknShop, while Trinity is expanding its operations in Europe and the US. Trinity manages haberdasher brands Kent & Curwen and Gieves & Hawkes among others.In the short term, optimism among retailers may depend less on sectoral trends and more on the October party plenum in Beijing, where the government is expected to announce reforms.Beijing has begun a new round of economic stimulus through targeted lending by China Development Bank and Agricultural Bank of China to finance infrastructure building.Financial support in 2008-09 led to a poorly co-ordinated splurge of investment, resulting in industrial overcapacity and bad debts. Announcing the right mix of policies and stimulus will be crucial, with analysts highlighting interest rate reform as one priority."A lot of officials are aware of the mistakes they made," said Shen Jianguang, chief economist at Mizuho Securities Asia. Shen said officials planned to focus on promoting the services sector rather than industry.If they can find ways to get people spending again, it will certainly please the retailers.迷你倉