May Retail Sales Turn Negative YoY for First Time; Prefer ANTA and Laopu Gold
AI summary card
May Retail Sales Turn Negative YoY for First Time; Prefer ANTA and Laopu Gold
China's social retail sales in May fell 0.6% YoY, the first negative growth since the pandemic, with no reversal signal yet for the consumer sector. Against this weak backdrop, the report maintains Buy ratings on ANTA Sports and Laopu Gold.
- May total retail sales fell 0.6% YoY, missing market expectations of slight 0.1% growth
- Above-quota enterprise retail sales fell 5.2% YoY, the main drag
- Home appliances and building materials continued deep negative growth, declining 15.6% and 13.6% respectively
- Beverages and apparel/footwear maintained positive growth, showing relative resilience
- Maintain Buy rating on ANTA Sports with target price of HKD 125
- Maintain Buy rating on Laopu Gold with target price of HKD 1,114
Report interpretation
Overview
This report analyzes the latest changes in China's consumption data for May 2026. The core conclusion is that retail momentum has further weakened, with May social retail sales recording the first YoY decline since the end of the pandemic, and falling short of market expectations. Although high base effects and unfavorable weather are short-term factors, the report believes this reflects broad-based weakness in the consumer sector, which lacks policy stimulus and wealth effect support in the near term, and consumer sentiment will remain subdued. Against this backdrop, the report adopts a stock-picking strategy, continuing to favor ANTA Sports and Laopu Gold.
Core views
Macro data level: China's social retail sales in May fell 0.6% YoY to RMB 4.1 trillion, the first YoY negative growth for this indicator since end-2022, and also failed to meet the Wind consensus expectation of slight 0.1% growth. Among this, above-quota enterprise retail sales fell 5.2% YoY, becoming the main drag. While high base effects and hot, rainy weather in May limited consumer activity, the weak data also indicates that softening in the consumer sector is broadening. Sub-category performance diverged: Catering service sales grew only 0.6% YoY, notably slowing from April's 2.2%. In merchandise retail, most categories saw weakened momentum, but beverages (+6.1% YoY), apparel and footwear (+3.8% YoY), and office equipment (narrowing decline to 1.5% YoY) performed relatively better or improved. In contrast, real estate post-cycle related home appliances (-15.6% YoY) and building and decoration materials (-13.6% YoY) remained in deep negative growth territory, with no reversal signal yet. Stock selection logic: Given weakening retail momentum and lack of demand-side policy stimulus, the report prefers companies with clear development strategies, visible margin trends, and attractive valuations. In sportswear, ANTA Sports remains the top pick; in retail, Laopu Gold is favored, believed to maintain relatively stable margin trends and improve operating leverage, especially under a more relaxed geopolitical environment and stabilizing spot gold prices.
Analysis framework
The report adopts a top-down and bottom-up combined analytical approach. First, by interpreting macro retail data released by the National Bureau of Statistics, it identifies the trend of overall weakening consumer momentum, and excludes short-term weather and base effect disturbances to judge broad-based fundamental weakness. Second, through volume-price decomposition and category comparison, it deeply analyzes performance differences across consumer sub-sectors, identifying resilient areas (e.g., staples, some discretionary consumption) and severely pressured areas (e.g., real estate post-cycle). Finally, amid macro headwinds, it shifts to micro fundamental stock selection, focusing on companies' strategic clarity, margin trends, and valuation levels, thereby screening out quality targets capable of weathering the cycle.
Methodology notes
Decomposing total retail sales into performance of different categories (e.g., catering, merchandise) and specific product categories (e.g., home appliances, apparel) for analysis
By decomposing aggregate data, the report can identify which sub-sectors are dragging overall growth (e.g., home appliances, building materials) and which remain resilient (e.g., beverages, apparel), thereby more precisely grasping structural industry opportunities and risks.
Determining target price based on forecast earnings per share (EPS) for the next 12 months or specific fiscal year multiplied by price-earnings ratio (P/E)
The report uses 25x next 12-month P/E for ANTA (consistent with its five-year average forward P/E), and 22.5x FY2026 P/E for Laopu Gold (consistent with its high-growth trajectory). This is a typical relative valuation method aimed at measuring the reasonableness of stock price relative to earnings capacity.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- ANTA Sports (2020 HK)Sportswear leader with clear development strategy and visible margin trends, attractive valuation
- Strengths
- Clear strategy, visible margin trends, valuation attractiveness (after recent price decline)
- Weaknesses
- Facing intensifying domestic and international competition, sales growth may be slower than expected
- Comparison
- Top pick in sportswear sector
- Risks
- Intensifying competition, slowing sales growth, macroeconomic dynamics weaker than expected
- Laopu Gold (6181 HK)Preferred in retail space, expected to maintain stable margins and improve operating leverage
- Strengths
- Relatively stable margin trends, improving operating leverage
- Weaknesses
- Significantly affected by gold price volatility, fashion risk
- Comparison
- Favored in retail space
- Risks
- Significant gold price weakness, fashion risk higher than expected, macro environment weaker than expected
Key data
- May total retail sales YoY growth-0.6%First YoY negative growth since end-2022, missing expected +0.1%
- Above-quota enterprise retail sales YoY-5.2%Main drag
- Catering service sales YoY growth+0.6%Slowing from April's +2.2%
- Home appliance sales YoY growth-15.6%Continued deep negative growth
- Building and decoration materials sales YoY growth-13.6%Continued deep negative growth
- Beverage sales YoY growth+6.1%Accelerating from April's +3.6%
- Apparel and footwear sales YoY growth+3.8%Broadly flat with April's +3.6%
Impact & implications
The report believes that due to the lack of meaningful consumer demand-side policy stimulus, limited wealth effects from recovery in tier-1 and tier-2 city real estate markets, and limited consumption support from AI-driven stock markets, near-term consumer sentiment will remain subdued. This creates pressure on companies dependent on mass consumption and real estate post-cycle sectors. However, for leading companies with strong brand power, clear strategies, and good cost control capabilities (e.g., ANTA, Laopu Gold), their market share and profitability may remain relatively stable, or even benefit from industry consolidation. Investors should lower expectations for overall sector beta and instead focus on individual stock alpha.
Risks
- Intensifying domestic and international competition (for ANTA)
- Slower than expected sales growth (for ANTA)
- Macroeconomic dynamics weaker than expected (for ANTA and overall consumption)
- Significant gold price weakness (for Laopu Gold)
- Fashion risk higher than expected (for Laopu Gold)
What to watch
- Whether substantive policy stimulus on the consumer demand side is introduced
- Recovery of tier-1 and tier-2 city real estate markets and their wealth effects
- Spot gold price trends and their impact on Laopu Gold's margins
- Whether sales of real estate post-cycle categories such as home appliances and building materials show stabilization signals