July retail sales growth slowed to 0.6%; China's consumer recovery remains weak
AI summary card
July retail sales growth slowed to 0.6%; China's consumer recovery remains weak
Nomura believes that while weather disruptions had an impact, below-expectation July retail sales still indicate weak willingness to spend; service consumption remains more resilient than goods consumption, and it continues to favor ANTA, Yum China, and Midea.
- Total retail sales of consumer goods rose 0.6% YoY in July to CNY3.9tn, below the market expectation of 1.5% and June's 1.0%.
- Retail sales excluding autos grew 2.5% YoY, below June's 3.0%; merchandise retail sales by enterprises above the designated size fell 3.4% YoY.
- Foodservice sales grew 1.4% YoY, accelerating from 1.2% in June; merchandise retail sales increased only 0.5% YoY, below June's 0.9%.
- Apparel, footwear and headwear, gold and jewelry, sports and entertainment, building materials, and furniture categories weakened; the decline in home appliances narrowed.
- Service-related consumption, especially tourism, culture, and sports events, grew faster than goods consumption.
Report interpretation
Overview
Following its review of China's July retail data, Nomura noted that total retail sales of consumer goods growth slowed to 0.6% YoY, below consensus expectations and continuing to decelerate from June. Although adverse weather may have caused some drag, the institution believes the data still reflect weak willingness among Chinese consumers to spend.
Core views
Goods consumption was broadly under pressure, while service consumption performed relatively better. Discretionary categories such as apparel, footwear and headwear, gold and jewelry, and sports and entertainment weakened significantly; food and beverages, tobacco and alcohol, cosmetics, and office equipment maintained growth, but growth rates generally slowed. The decline in home appliance sales narrowed, while the downtrend in building materials and furniture deepened further. In stock selection, the institution continues to favor industry leaders with structural growth strategies, visible margin trends, and attractive valuations.
Analysis framework
Based on monthly total retail sales of consumer goods data from the National Bureau of Statistics, the report compares YoY growth rates with the prior month for headline retail sales, retail sales excluding autos, foodservice and merchandise retail sales, and major consumer categories. It also selects stocks based on competitive positioning, margin trends, management's shareholder-return orientation, and valuation.
Methodology notes
Total retail sales of consumer goods and category-level sales trends
Compares YoY growth rates in July and June to assess overall consumption momentum, the relative performance of services versus goods consumption, and category divergence.
ANTA Target Price
ANTA's HKD89.9 target price is based on 17.5x forward 12-month P/E, reflecting its leading position in China's sportswear industry and stable growth trajectory.
Yum China Target Price
The HKD464.00 target price for 9987 HK and the USD59.50 target price for YUMC US are both based on 10x forward EV/EBITDA and imply a discount to global peers.
Midea Target Price
Midea's CNY98.50 target price is based on 16.0x forward 12-month P/E, approximately one standard deviation above its historical average.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- ANTA Sports ProductsNomura's top pick in the sportswear sector
- Strengths
- Leading position in China's sportswear industry and a relatively stable growth trajectory.
- Weaknesses
- July sales of sports and entertainment goods declined 10.6% YoY, indicating a weak industry demand environment.
- Comparison
- Target price of HKD89.9 is based on 17.5x forward 12-month P/E.
- Risks
- Intensifying domestic and overseas competition, sales growth below expectations, and a weaker-than-expected macro environment.
- Yum ChinaA favored consumer leader by Nomura; both 9987 HK and YUMC US are rated Buy
- Strengths
- Strong industry leadership and management's emphasis on preserving shareholder returns.
- Weaknesses
- A slowdown in consumer spending may affect operating performance.
- Comparison
- The HKD464.00 target price for 9987 HK is based on 10x forward EV/EBITDA; the USD59.50 target price for YUMC US is based on 10x forward 12-month EV/EBITDA, with both at a discount to global peers.
- Risks
- Slower consumer spending, food safety issues, China-US trade tensions, and rising labor and raw-material costs.
- Midea GroupA favored home appliance leader by Nomura, rated Buy
- Strengths
- Established industry leadership and management's emphasis on protecting shareholder returns.
- Weaknesses
- July home appliance sales still declined 1.9% YoY, with only a narrowing of the decline.
- Comparison
- Target price of CNY98.50 is based on 16.0x forward 12-month P/E, one standard deviation above the historical average.
- Risks
- Rising commodity prices, intensifying price competition, and further deterioration in macro factors.
Key data
- July Total Retail Sales of Consumer Goods+0.6% YoY, CNY3.9tnBelow the market expectation of +1.5% YoY; June was +1.0% YoY.
- Retail Sales Excluding Autos+2.5% YoYJune was +3.0% YoY.
- Foodservice Sales+1.4% YoYJune was +1.2% YoY.
- Merchandise Retail Sales+0.5% YoYJune was +0.9% YoY.
- Gold and Jewelry Sales-10.1% YoYJune was -3.4% YoY.
- Sports and Entertainment Goods Sales-10.6% YoYJune was -2.2% YoY.
- Home Appliance Sales-1.9% YoYThe decline narrowed from -8.7% YoY in June.
Impact & implications
Weak headline retail data imply that the short-term fundamentals of China's consumer sector remain under pressure. Investors should focus on the resilience of service consumption and leading companies with competitive advantages, margin visibility, and valuation support. Persistently weak demand for property-related building materials and furniture may continue to constrain performance across related consumer supply chains.
Risks
- Persistently weak consumer willingness to spend could lead to further weakening in retail sales growth.
- Adverse weather and a worsening macro environment could weigh on offline consumption.
- Continued declines in property-related consumption such as building materials and furniture.
- Intensifying competition in consumer industries, along with rising raw-material and labor costs.
- Food safety incidents and China-US trade tensions could affect foodservice-related names.
What to watch
- Whether subsequent monthly total retail sales of consumer goods and retail sales excluding autos can stabilize.
- Whether service consumption, including foodservice, tourism, culture, and sports events, can continue to outperform goods consumption.
- Demand recovery in discretionary categories such as apparel, footwear and headwear, gold and jewelry, and sports and entertainment.
- Whether home appliance sales declines can turn positive and whether the downturn in furniture and building-material sales eases.
- Sales growth, margin trends, and shareholder-return initiatives at ANTA, Yum China, and Midea.