Consumer market to send mixed signals in 2013: UBS

The Chinese consumer market will send mixed signals and might see some confusion in 2013, as the performance of the different sectors won’t move synchronously during the year, said an analyst from UBS Investment Research.

"Positive and negative newsflow will likely emerge at the same time," said Spencer Leung, China and Hong Kong consumer analyst with UBS.

The sportswear sector, which is facing a downturn since 2010, will be the first to recover among the different consumer-discretionary segments, according to Leung.

International and local sportswear companies are facing problems such as high inventories and increasing costs, as well as sliding market demand, in the last few years. In December 2012, Li Ning Co Ltd, the best-known sports products maker in China, warned it may report a full-year loss.

"In 2013, UBS estimates imply a strong recovery in channel efficiency, unit earnings before interest and tax (Unit EBIT) may increase from 1,281 yuan per square meter in 2012 to 1,409 yuan per sq m in 2013, an increase of 10 percent year-on-year," said Leung. "We observed signs of early recovery in the discount channel in 2012"

In 2013, department store operators will see sector profitability continue to decline as expansion continues.

"Floor space of department stores will continue to expand at 20 percent year-on-year for the next few years, but sales efficiency for the sector will subsequently decline over the next few years," said Leung.

Leung estimated that the sector's average Unit EBIT will decline from 1,915 yuan per sq m in 2012 to 1,829 yuan per sq m in 2013.

Affluent mainland visitors from wealthy provinces such as Beijing and Shanghai are expected to spend less time in Hong Kong, which may hit the city's luxury retail sector.

However, experts believe that there will be increased visits by people from less-affluent provinces. Those visitors will boost demand for less-expensive products such as personal care products or cosmetics from retailers such as Sasa or Mannings.

The new trend will benefit companies with strong brand recognition and lower prices in the next few years.