Weakness to persist for Chinese department stores

Christmas trees bring a festive mood to a shopping mall in Beijing, Nov 21, 2014. [Photo/IC]

BEIJING - The challenges faced by Chinese department stores are likely to continue, casting a shadow on the sector for the next 12 months or even longer, Fitch Ratings predicted earlier this week.

Weakness prevailed in department stores in China with declined revenues and even shutdowns. Analysts believed slowing consumer spending and economic growth contributed to the lackluster performance.

"A rising supply of department outlets as well as the growing popularity of alternative formats such as shopping malls, specialty stores and e-commerce, has intensified the competitive landscape," Fitch said in a latest report.

Sales growth for department stores has been lagging that of other retail sales channels, and the market share of department stores has been eroded to the low teens from 20.5 percent in 2005, according to the rating agency.

"Recent trends suggest that department store sales would continue to diverge from total retail sales growth," said Fitch.

The report expected that department stores to operate with higher leverage over the next 12 to 18 months and market consolidation is likely to be drawn-out over the next few years with smaller scale and less efficient operators exiting the industry.