Sportswear to outpace casinos as Chinese consumers earn more: UBS
Tuesday, 20 January 2015 00:19
HONG KONG (Reuters): Sportswear companies could outpace casinos in Asia in terms of floor space profitability growth in 2015, as China’s middle class takes advantage of cheaper domestic brands and an anti-corruption campaign hits gaming, UBS said on Thursday.
Retailers are skittish about expanding in Asia as China’s 2014 economic growth is expected to hit a 24-year low – putting a dampener on prospects for consumer investors in the region, UBS said in a report.
But sportswear companies – Li Ning Co Ltd in particular – could be a bright spot as personal income grows in China and more and more people are able to afford branded gear like sneakers.
The Chinese company, whose shares fell 38.1% last year, is expected to go from losing an average of 373 yuan ($ 60) for each square meter of store space in 2014 to generating a 1,147 yuan operating profit on each of those square meters this year, UBS said.
Rival Anta Sports Products Ltd was also expected to benefit, growing its operating profit 12% to 2,322 yuan on the same basis.
While much more lucrative in absolute terms, gaming companies were expected to fare worse on a relative basis this year as junket operators with VIP clients forced casinos to compete on commissions and credit availability.
Average profit per square meter for gaming companies was expected to fall 6.7% this year, with SJM Holdings Ltd plummeting 13.6% to 5,871 yuan and Galaxy Entertainment Group Ltd falling 9.9% to 8,858 yuan.
85% of retailers analysed in the report were cautious about expanding this year, up from 72% last year. 31% said they would not expand or would scale back.