Gift crackdown takes toll on store operators

High-end retailers hit by fears of further fallout from campaign against government spending

PUBLISHED : Tuesday, 19 February, 2013, 12:00am
UPDATED : Tuesday, 19 February, 2013, 4:58am

Department store stocks were hammered on the first trading day after the mainland's week-long Lunar New Year break amid concerns that Beijing's crackdown on "gift giving" may further hurt high-end retail sales.

Leading the sales plunge was Intime Department Store, which fell 3.7 per cent to HK$10 yesterday. Jiangsu-based Golden Eagle Retail dropped 3.1 per cent to HK$15.54 while Parkson Retail, Lifestyle International and New World Department Store China slid between 0.6 per cent and 1.1 per cent, compared to a 0.27 per cent dip in the benchmark Hang Seng Index.

Separately, Aeon Stores (Hong Kong) fell 5.6 per cent to HK$19.82 after issuing a profit warning for last year.

The operator of more than 50 department stores and supermarkets in Hong Kong and south China is expected to record "a significant decrease" in net profit due to less operating revenue, growing costs of new store openings and rising impairment losses in fixed assets.

"The sharp decline in government spending on gifts and dining is the key reason for the sluggish sales of many department stores, supermarkets and high-end restaurants during the Lunar New Year," said Cao Lisheng, a deputy secretary general of the China General Chamber of Commerce.

Beijing issued a stern warning before the Lunar New Year, forbidding government officials from spending public money on gifts, celebrations or banquets. It also forbids government officials from accepting store coupons or prepaid shopping cards.

Cao said sales revenue at many mainland department stores had dropped 8 to 9 per cent year on year since December.

The booming e-commerce business, slower economic growth and lower inflation contributed to softer retail sales during the holiday period.

The Ministry of Commerce said on Friday that sales at shops and restaurants grew 14.7 per cent year on year to 539 billion yuan (HK$669 billion) during the seven-day Lunar New Year holiday. The growth was down from a 16.2 per cent gain last year.