Hang Lung Properties: retail sales weakened in Shanghai15 March, 2012, 19:50. Posted by Zarathustra
Tags: Hang Lung Properties, Real Estate
Hang Lung Properties (101.HK), the operator of various commercial properties (notably shopping malls), said in its annual report that they noticed some weakening of retail sales. I believe that is consistent with the overall slowdown, and the disappointingly slow growth in retail overall:
In Shanghai we detected a weakening of retail sales. As a result, growth in rent, while continuing, has slowed. Office rental has improved somewhat. Margins remain high and again we are basically fully occupied. The mall in Plaza 66 has seen several major tenants expanding their shops, so some space is temporarily taken out of the market.
This is consistent with some of the observations made by a team of analysts from JPMorgan, which I noted previously:
Softer sales in October: Most of the retailers that we visited during the tour recorded different degree of sales growth slowdown in Oct compared to the first nine months, attributing this to 1) increasing macro headwinds, 2) warmer weather, as well as 3) higher base last year during the World Expo. Nevertheless, most retailers seemed reluctant to call it a “slowdown trend” and anticipated potentially strong year-end sales, given the much earlier Chinese New Year (end of Jan 2012). In addition, most retailers were comfortable with current inventory levels and suggested no urgency for heavy discounts. Separately, no retailers have encountered funding issues due to the credit tightening.
A slowdown trend forming? Softer sales in Shanghai seem to us to be early signs of a slowdown and suggest moderating growth of consumer discretionary sector in the near term, especially toward 1H 2012E when the sector has a tough base to beat. We have built in a new lower earnings base for 2012, reflecting SSSG slowdown and margin contraction. We currently look for 15% y/y sales increase and c.13% y/y earnings increase for 2012 (ex-sportswear), which are still on average 3% and 7% below the consensus respectively. Therefore we expect more consensus downward revisions.