Deutsche Bank Markets Research
Based on comments from department stores (such as Golden Eagle and
NWDS), mature menswear is one of the weak categories with SSS growth
performance falling below average. For more information about performance
in other categories, please refer to Winnie Mak’s alert China Department Stores
- Stabilized, awaiting recovery, published on 15 October 2013.
For China, we expect 3Q performance to be in line with 1H13’s performance
with no further deterioration in sales or SSS performance. However, it is too
early to say that it has bottomed out, as 3Q is normally a low season for
apparel. Hot weather also affects the sale of fall/winter products. As
management mentioned in previous meetings, 4Q performance is key to 2H
performance; hence, visibility remains low.
For Hong Kong, we expect sales growth to remain decent. For reference,
around 60% of sales in its Hong Kong stores come from PRC tourists, with the
rest from local consumers (30%) and international tourists (10%). Meanwhile,
the Taiwan operation has bottomed out, as mentioned during the 1H13 results
meeting in August.
We maintain Hold as we believe the stock is fairly valued. Recent strong share
price movement might be due to the expectation of SSS growth bottoming
out, just like for other China discretionary plays.
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