Hong Kong retail sales climbed 10.5% in January

Thanks to strong consumer durables segment.

According to Barclays Research, Hong Kong saw January retail sales +10.5% y/y, in line with the Bloomberg consensus economist expectation of +10.4% y/y.

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The January figure was a further pickup from the November 2012 +9.4% growth and December 2012 +9.1% y/y growth. Volume growth in January was +10.4% y/y vs the +8.5% y/y in December.

However, we would like to point out that January (in particular the durables segment) has likely been distorted by the change in the timing of Chinese New Year to mid-February this year from late January in 2012 so trends might not be too indicative of like-for-like growth in demand.

Consumer durables growth was very strong: Consumer durables saw the strongest pickup in growth to +51% y/y in January compared with the +21% y/y seen in December.

The pickup was strong across the categories of motor, electronics and furniture. We believe this is mostly due to the shift in CNY. Local consumer spending usually reaches a seasonal high before CNY.

Some discretionary segments weak in January: Department stores were only +1.4% y/y in January. Clothing and footwear turned to negative growth at down 1.8% y/y vs the +6% y/y growth in December.

But jewellery/watches and cosmetics were strong: However, jewellery and watch sales remained strong at +13% y/y in January, sustaining the low teens growth rates seen in November and December, respectively.

We believe this points to continued recovery in the Hong Kong operations of Chow Tai Fook (1929.HK, OW). This is also consistent with Luk Fook’s earlier announcement that its CNY growth for Hong Kong and Macau had been strong at +42% y/y in SSS and SSS for China was at +32% y/y.

The medicines and cosmetics category also returned to a double-digit growth rate in January with +11% y/y growth. This is in line with what Sa Sa (178.HK, OW) had been seeing with its January to mid-February combined seeing +30% y/y sales growth.

We believe February will also demonstrate positive trends for most Hong Kong discretionary segments: We believe February will demonstrate positive trends for most discretionary segments in Hong Kong, in particular for the jewellery and cosmetics segments.

Retailers’ observations for China had been mixed, but some department store operators like Lifestyle and Maoye have also started to see slightly better y/y growth trends in China into January/February.

Parkson also is expecting low single-digit SSS in 1H13 vs the negative growth seen in 4Q12. We have Overweight ratings on Chow Tai Fook (1929.HK), Golden Eagle (6808.HK), Belle (1880.HK), Sa Sa (178.HK), Prada (1913.HK) and Samsonite (1910.HK).