Absolute spending in department stores in China stabilize

    Moody's Investors Service said in a newly released report that absolute spending in department stores in China has stabilized, likely growing year-on-year by 0.3% in 2019 and 0.1% in 2020, after declining by low single-digit percentages from 2014-16.
  "Department stores in China were slow to respond to increased competition from fast-growing online retailers," said Shawn Xiong, a Moody's Assistant Vice President and Analyst. "This delayed reaction led to a slowdown in department store spending that began in 2013."
  But Moody's said that the growth in online retails sales will slow to 15%-20% during 2019-20 - after spiking by 275% in 2010 from a low base - because of the already high level of online retail spending in Tier 1 and Tier 2 cities.
  "Some consumers are returning to brick-and-mortar stores that offer premium, less-commoditized products, as well as more experience-based services," added Xiong.
  Shoppers have been drawn to department stores that have changed their store formats and product mixes. Moody's cited Golden Eagle Retail Group Ltd (Ba2 stable)(03308) and Maoye International Holdings Ltd. (B2 stable)(00848) as companies that have transformed their stores into large, mall-like formats with a wide selection of premium products and services including food, beverage and entertainment options.
  The transformations have led to growth in year-on-year gross sales proceeds in 2018 of around 10% for Golden Eagle and 1% for Maoye.
  Moody's also pointed out that because Golden Eagle and Maoye own most of their stores, they are insulated from rising rental costs. Moody's expects Golden Eagle to achieve gross retail margins of 45% over the next 12-18 months, and Maoye 44%.