Sa Sa's 4Q FY15 Hong Kong and Macau sales down 2.4% y/y

1Q FY16 sales were also disappointing.

Sa Sa announced that its 4Q FY15 (January-March 2015) retail and wholesale sales for its core Hong Kong/Macau segment were down 2.4% y/y and its same store sales growth (SSSG) was 0.9% y/y.

According to a research note from Barclays, the results were in line with its estimates. The number of transactions attributable to Mainland customers grew by 12% y/y, but there was a 13% decrease in average sales per transaction.

Meanwhile, Sa Sa saw strong 7% y/y retail sales growth, and 8% SSSG in Hong Kong/Macau during the Labour Day holiday weekend (1-3 May).

However, management noticed that traffic weakened remarkably before and after the Labour Day holiday. Overall Hong Kong/Macau retail sales saw a 5% y/y decrease quarter-to-date (QTD; refers to 1 April 2015 to 10 May 2015), and SSS decreased by 4% QTD.

The number of transactions attributable to Mainland customers increased by 7%, which was more than offset by the 15% decrease in average sales per transaction.

Here's more from Barclays:

We believe the sales improvement during the Labour Day Holiday was driven by Mainland Chinese visitor arrival growth of 13.8% y/y during the Labour Day weekend (1-3 May), which was driven both by group tours, which were up 30% y/y, and transit visitors, which were also up 30% y/y.

Overnight visitors on the other hand were still down 10% y/y during the Labour Day weekend (Source: Ejinsight, 5 May 2015). We believe Hong Kong attracted stronger-than-expected visitor arrivals due to cheaper hotel and tour group prices during the holiday period.

Growth likely to remain slow longer term: We continue to expect slow growth for Hong Kong retailers and Sa Sa longer term due to:

1) the higher spending visitors diverging to other destinations due to general demand for more diversified experiences and the currency depreciation elsewhere;

2) protests in Hong Kong have likely impacted sentiment towards travelling to Hong Kong for Mainlanders;

3) the longer term price gap between Hong Kong and China could narrow if China's cosmetics consumption tax is removed; and

4) e-commerce channels are now offering direct purchases of overseas products, which could post a threat to Sa Sa.