March China retail sales weakened sequentially after the holidays, with consumption recovery still mainly gradual

Overview

This report reviews China’s March 2026 retail sales data. Morgan Stanley believes that demand weakened sequentially after the Spring Festival period, with March retail sales up 1.7% year-on-year, below the consensus forecast of 2.4% and slower than in 1-2 months of 2026. On a compound growth basis relative to 2019, total momentum improved slightly to 4.0%, but offline categories such as food and beverage still show signs of deceleration.

Core views

The core view is that China’s consumption recovery remains gradual and uneven. Most retail categories still posted positive year-on-year growth, but growth generally softened post-holidays. Cosmetics and soft beverages performed relatively better, jewelry stayed in double digits, while home goods, electronics/appliances, and sports and leisure goods weakened. The report expects consumption to improve moderately in April and into summer, but consumers remain cautious.

Analysis framework

The report mainly gauges consumption momentum through National Bureau of Statistics year-on-year retail sales by category, compound growth relative to 2019, channel research, and company commentary, and maps changes in retail sub-industries to relevant stocks.

Methodology notes

• Macroeconomic consumption trackingYoY retail sales and 2019-referenced compound growth comparison

  Observe both current-year YoY figures and compound annual growth relative to 2019 simultaneously to avoid distortion from a single YoY series with base effects.

  The report shows March and Jan-Feb YoY growth for total retail sales, retail sales excluding auto sales, food and beverage, and multiple categories, and compares them with the compound growth pace relative to 2019 to assess both short-term post-holiday changes and the medium-term recovery level.

• Industry comparisonSub-sector consumption momentum analysis

  Compare growth changes by category across food & beverage, jewelry, cosmetics, food and beverages, home goods, electronics/appliances, and related groups.

  This approach is used to identify categories that remain resilient after the holidays and those more clearly affected by subsidy tapering and weaker demand.

• Stock mappingTheme-driven stock selection framework

  Screen potential names from three angles: offline consumption recovery, supply-side rebalancing, and company-specific catalysts.

  The report maps retail sales trends to companies including Haidilao, YUM China Holdings Inc, CRB, Eastroc, Mengniu, Yili, Muyuan, Mao Geping, and Pop Mart.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Haidilao (6862.HK)

  Stock related to offline consumption recovery

  Strengths

  A focus area that could benefit from recovery in dining and offline foot traffic.

  Weaknesses

  March dining growth slowed versus Jan-Feb, indicating post-holiday demand remains relatively weak.

  Comparison

  Included alongside other offline consumption names on the consumption recovery watchlist.

  Risks

  Consumer sentiment is still cautious, and dining recovery may continue to be volatile.

• YUM CHINA HOLDINGS INC (YUMC.N)

  Stock related to offline consumption recovery

  Strengths

  Tied to dining recovery and included in the report’s focus on offline consumption.

  Weaknesses

  Dining growth decelerated from 4.8% to 2.9%, implying weaker short-term momentum.

  Comparison

  Listed with Haidilao as an offline dining recovery watch item.

  Risks

  Post-holiday demand weakness and consumer caution could continue to pressure same-store growth.

• CRB (0291.HK)

  Stock related to offline consumption recovery

  Strengths

  Linked to offline and beverage consumption recovery.

  Weaknesses

  Food and beverage growth slowed versus Jan-Feb.

  Comparison

  Soft beverages are relatively strong, but broader food-and-beverage remains post-holiday weaker.

  Risks

  If offline recovery falls short, related sales and channel momentum could be pressured.

• Eastroc (605499.SS; 9980.HK)

  Stock related to offline consumption recovery

  Strengths

  Soft-drinks YoY growth accelerated from 6.0% in Jan-Feb to 8.2% in March, supporting a relatively strong category.

  Weaknesses

  Food and beverage headline growth still slowed versus Jan-Feb.

  Comparison

  Among the names listed in offline consumption recovery themes, soft-drink category data appears relatively better supported.

  Risks

  Fluctuating consumption recovery and competition may affect the persistence of growth.

• Mengniu (2319.HK)

  Stock related to supply-side rebalancing

  Strengths

  Listed by the report as a watchlist name under the supply-side rebalancing theme.

  Weaknesses

  No company-specific operating data was provided.

  Comparison

  Grouped with Yili under the dairy supply-side rebalancing theme.

  Risks

  Uncertainty around progress in industry supply-demand adjustments and recovery of consumer demand.

• Yili (600887.SS)

  Stock related to supply-side rebalancing

  Strengths

  Listed by the report as a watchlist name under the supply-side rebalancing theme.

  Weaknesses

  No company-specific operating data was provided.

  Comparison

  Grouped with Mengniu under the dairy supply-side rebalancing theme.

  Risks

  If demand recovery is slower than expected, timing of profit improvement from supply-side rebalancing may be delayed.

• Muyuan (002714.SZ; 2714.HK)

  Stock related to supply-side rebalancing

  Strengths

  Listed by the report as a watchlist name under the supply-side rebalancing theme.

  Weaknesses

  No company-specific operating data was provided.

  Comparison

  Grouped with the dairy names under the supply-side rebalancing theme.

  Risks

  Supply-cycle and price volatility may affect earnings leverage.

• Mao Geping (1318.HK)

  Stock with company-specific drivers and share-gain upside

  Strengths

  The report sees company-specific catalysts as a potential source of share gains or attractive risk-return.

  Weaknesses

  No separate financial or valuation data was disclosed.

  Comparison

  Cosmetics growth accelerated from 4.5% in Jan-Feb to 8.3% in March, showing relatively strong category performance.

  Risks

  Persistence of category growth, competition, and consumer sentiment remain watch points.

• Pop Mart (9992.HK)

  Stock with company-specific drivers and share-gain upside

  Strengths

  The report views this name as potentially benefiting from company-specific drivers, share-gain potential, or favorable growth prospects.

  Weaknesses

  No separate company operating data was disclosed.

  Comparison

  Relative to the broader slowing macro consumption trend, company-specific drivers are framed as a key differentiator.

  Risks

  Cautious consumer sentiment, discretionary spending volatility, and valuation risk need monitoring.

Key data

• March total retail sales1.7% YoYBelow market consensus of 2.4%, and down from 2.8% in Jan-Feb.
• March total retail sales compound growth relative to 20194.0%Slightly above 3.9% in Jan-Feb.
• Retail sales excluding autos3.2% YoYSlowed from 3.7% in Jan-Feb; compound growth relative to 2019 was 4.1%.
• Food & beverage2.9% YoYSharply slower than 4.8% in Jan-Feb, with relative compound growth versus 2019 down to 3.6%.
• Jewelry11.7% YoYStill double-digit growth, but lower than 13.0% in Jan-Feb.
• Cosmetics8.3% YoYAccelerated from 4.5% in Jan-Feb, making it one of the categories with improved sequential trend.
• Home goods-8.7% YoYTurned to negative growth from +8.8% in Jan-Feb, reflecting weaker subsidy effects.
• Electronics and appliances-5.0% YoYTurned negative from 3.3% in Jan-Feb.
• Food and beverage including tobacco and alcohol9.0% YoYSlower than 11.8% in Jan-Feb, but compound growth relative to 2019 was 9.4%.
• Soft beverages8.2% YoYAccelerated from 6.0% in Jan-Feb.

Impact & implications

In investment terms, the report does not view consumption as having entered a strong one-way rebound. Instead, it emphasizes a gradual and uneven recovery. In the near term, attention should be on whether post-holiday demand improves in April and through summer. Structurally, jewelry, cosmetics, and soft beverages remain relatively stronger, while home goods and appliances are more exposed to subsidy tapering. At the stock level, focus is on offline consumption recovery, supply-side rebalancing, and stock-specific drivers that can improve market share or risk-return.

Risks

• The consumption recovery path remains gradual and volatile, with consumer sentiment only modestly improved but still cautious.
• Demand weakened sequentially after the Spring Festival, and most categories slowed in March versus Jan-Feb.
• Home goods and electronics/appliances turned negative due to weakening subsidy effects.
• Dining growth slowed sharply, suggesting offline recovery is not yet durable.
• Jewelry remains double-digit positive, but decelerated versus Jan-Feb and may remain exposed to gold price volatility.

What to watch

• Whether consumption shows the moderate rebound expected by the report in April and into summer.
• Whether dining and offline footfall can recover from the post-holiday slowdown in March.
• The persistence of stronger growth in relatively resilient categories such as cosmetics, soft beverages, and jewelry.
• Actual demand resilience in home goods and appliances after subsidy tapering.
• Whether improvements in consumer confidence can translate into broader discretionary-consumption recovery.
• How quickly companies deliver on share gains, supply-side rebalancing, and risk-return improvement.