Apparel spending by Chinese consumers to likely stay weak: S&P Global

Within discretionary spending, consumers' desire to spend on apparel ranks below that of services. S&P Global does not expect a full recovery to happen in this sector over the next 12-18 months.

Sector retailers, including down apparel maker Bosideng International Holdings Ltd, will have to balance between value, function, and fashion as consumers become more price sensitive. Off-price retailers, such as Vipshop Holdings Ltd, are likely to grow faster than industry as consumers seek value.

Maintaining its forecast for China's retail sales growth (ex-petroleum) at 5.8 per cent for this year, S&P Global said it will decelerate to 4.2 per cent next year—slower than its gross domestic product (GDP) growth forecast of 4.4 per cent.

Many companies are cutting expenses and expansion plans to shore up margins, cash flows and overall credit profiles. The risk appetites of the country’s rated retail firms are so reduced now that their margins and cash flow will likely improve next year despite cautious consumer outlays, S&P Global said in an analytical piece.

Online penetration that dipped this year will revert to growth in 2024 while ‘showrooming’ and ‘retailtainment’ will transform the physical retail experience, the analysis noted.

S&P Global sees Chinese consumers being cautious with their spending going into next year. They are saving more and shying away from big ticket items.

Fibre2Fashion News Desk (DS)