* Retail sector hit by weak 2012 economic growth, huge
* Popular jewellery chains not burdened by excessive stocks
* Apparel, appliances and footwear unlikely to see
By Donny Kwok
HONG KONG, March 26 High street jewellery chains
Chow Sang Sang and Luk Fook are best placed
among retailers in China to weather what promises to be another
turbulent year after an uncertain economy sapped consumer
confidence and cut earnings.
Retail sales grew at the slowest pace in nine years this
January and February, adding to the woes of top footwear
retailer Belle International Holdings and sportswear
group Li Ning Co Ltd who, like others, were battered
by weaker economic growth, rising wages and huge inventories.
Apparel, footwear and appliance retailers, saddled with
mounting stocks, are unlikely to see a turnaround soon. But
jewellers with popular appeal do not have an inventory overhang,
and that will help them benefit from the modest increase in
consumer spending expected this year, analysts said.
"There is nothing solid to confirm an organic recovery of
the overall retail sector," said Linus Yip, chief strategist at
First Shanghai Securities. "We don't expect demand to pick up
sharply this year and we don't expect to see many turnaround
China is forecast to become the world's largest retail
market in three years, and global consumer giants such as
Wal-mart Stores Inc and Nike Inc have banked on
its billion-strong consumers to fuel growth.
The outlook for this year, however, remains discouraging.
Nike, the world's largest sportswear company, said it was
still grappling with intense competition in China even though
orders for shoes and clothing scheduled for delivery from March
through July rose 4 percent.
Domestic retailers including Li Ning, Belle and home
appliance distributor GOME Electrical Appliances Holdings Ltd
, also warned economic uncertainty and bloated
inventories would depress the sector this year after weaker
earnings in 2012.
"In 2013, we won't see a significant change in the Chinese
economy. We will face greater pressure in the short term," said
Sheng Baijiao, chief executive of Belle.
The company, which sells its own brand footwear and
distributes foreign brands such as Nike, posted its slowest
profit growth since 2008.
Li Ning, which competes with Adidas and Nike,
said it expects inventory charges to cut its full 2013 earnings
by up to 1.8 billion yuan and has shuttered about a fifth of its
stores in a year.
ADAPTING TO CHANGE
The Chinese economy is expected to expand 7.5 percent in
2013, a level it barely beat in 2012 when growth eased to its
slowest pace in 13 years.
As the business environment becomes more challenging,
retailers are adapting their strategies to stay profitable.
Belle, which has more than 17,700 outlets in mainland China,
Hong Kong and Macau, plans to slow its retail network expansion.
GOME's focus will be on bolstering its online sales after
revenues dropped 20 percent while household electronics sales in
China grew 10 percent.
Li Ning said it would shift to a retail-oriented business
model from wholesale, and signed U.S. basketball star Dwayne
Wade to produce a new line of sportswear to boost brand image.
The company, backed by Singapore sovereign fund GIC
and U.S. private equity firm TPG Capital, on Tuesday
reported its first annual loss since it listed in 2004.
"The industry itself is still growing with spending
increasing due to urbanisation and as people's income
increases," Olympic gymnast and company founder Li Ning told
reporters after the earnings were announced.
"However, participants in the industry are struggling to
deal with the consequence due to over expansion and excessive
inventory. It may take two to three years for the operators to