Mainland China shopping malls and department stores struggling as economy slows
More restaurants, entertainment venues and fast-fashion flagship stores being added to attract young shoppers
A number of Chinese mall operators and department store chains have posted profit warnings in the past few weeks, reflecting weaker retail sales amid an economic slowdown and an e-commerce boom, with analysts predicting few will survive as competition heats up.
Joy City Property, a leading shopping mall developer targeting younger consumers and the property arm of state-owned food giant Cofco, said last week that rental growth had slowed and warned investors of a prospective 50 per cent to 60 per cent fall in net profit for last year due to a decrease in the revaluation of investment properties and exchange losses.
Traditional department stores are faring even worse. Maoye International, a Shenzhen-based department store operator, said it expected its net profit for 2015 to drop more than 80 per cent due to sluggish retail sales. Moody’s downgraded Maoye from B1 to Caa1.
Life Style International, which operates the Jiuguang chain of upmarket department stores on the mainland, closed its store in Shenyang in December, just two years after it opened. Life Style saw its net profit fall 10 per cent last year due to weak consumer sentiment in second- and third-tier cities.
You need to have strong bargaining power and maintain good relationships with tenants and that should be backed by the number of stores and branding
“China’s economic slowdown has dragged retail sales growth down from double digit to single digit,” said Lee Wee Liat, Hong Kong-based head of Asia property research at BNP Paribas.
Shopping malls and department stores are adding more restaurants, entertainment venues and fast-fashion flagship stores to compete with e-commerce operators and attract young shoppers.