Sa Sa blames these 4 reasons for sales slowdown

December sales growth slumped to 14.7%.

According to Barclays Research, Sa Sa 3QFY13 HK/Macau sales were +18.7% y/y on SSS growth of +12.6%: This is at the low end of the firm's estimate of 19-20% growth y/y. Breaking this down by the month, October sales growth was +19.3%, followed by +25.8% in November, but December slowed to +14.7% y/y (broadly in line with Barclays' mid-teens expectations). Overall group sales were +18.9% y/y.

Here's more from Barclays:

A few reasons for Dec slowdown: Management offered a few potential reasons behind the December Hong Kong/Macau sales growth slowdown:

1. Locals have not spent as much, with only 3.1% y/y growth during December, management's guess is that locals travelled outside of Hong Kong more.

2. Mainland visitors' spending has gone up +20.3% y/y in Dec; this is below the average of +25.4% for the Apr-Dec period this FY.

3. Breaking Dec data in half, the first three weeks saw +10.7% y/y sales growth, while the last two weeks accelerated to +25% y/y growth. Management believes the humidity in the first three weeks, which was higher than last year, deterred skincare purchases, which subsequently picked up in the last two weeks.

4. Management quoted ACNielsen saying that same-day visitors spend less on average and growth had been driven by same-day visitors.

We agree with how humidity could have been one of the drivers behind the fluctuation in Dec growth (due to skin care purchases), but we also think the timing of Chinese New Year last year (in January 2012) could have raised the Dec 2011 base comparison a bit.

We also add that Sa Sa’s lower sales growth in Dec should be in line with general Hong Kong retail. During our discussion with Lifestyle in early Dec, they also indicated they expect slower Dec growth on a higher base in Dec. However, we would not attribute slower growth in Dec to same-day visitors spending less as we believe same-day visitors benefit Sa Sa’s New Territories stores.

Management said the first week of January so far had only seen growth similar to the first half of Dec (re-cap, 1H of Dec was +10% y/y only). We agree with management that one should not read into January using a week of data.

We also believe the late Chinese New Year this year (in Feb, vs in Jan last year) will boost the y/y growth in Jan/Feb if we look at Jan and Feb combined. And therefore, we believe growth rates in Hong Kong/Macau sales will likely accelerate in 4QFY13E compared to Dec; we are still looking for low- to mid-20% y/y sales growth rate in 4QFY13E.