JPM-China Consumer Strategy July retail sales up 百分之3.7 yoy...-20250815

China July retail sales grew by 3.7% yoy (behind market expectations of +4.6%yoy), decelerating from Jun’s +4.8% and May’s +6.4%. We attribute the slowinggrowth to: 1) sales deceleration of the categories under trade-in program (i.e. auto,home apps, etc.), 2) the bad weather causing disturbance in economic activities insome regions (per NBS). Excluding the trade-in program beneficiary categories,we estimate July retail sales were up 4.2% yoy (similar to Jun’s 4.1%), driven byresilient trends in core F&B categories and a moderate pick-up in cosmetics,sportswear, etc. July catering sales were as weak as Jun, while we expect animprovement in Aug following the central government’s positive message on theanti-extravagant consumption act in end-June (link). Over the past 3/6 months,Bloomberg 2025 consensus earnings revisions were -1%/-4% for staples and -1%/-2% for discretionary (ex-Pop Mart & Laopu). This also suggests that overallconsumption demand has normalized and has been gradually recovering. IPmerchandise remains one of the best-performing consumer segments in 2025,providing affordable treats and creating immediate emotional and socialconnections. Most leading IP companies target sales and earnings growth of 25%+CAGR in the next three years, while most traditional companies should havesingle-digit sales growth with margin improvement. Our top-10 picks for the Chinaconsumer sector: 1) Pop Mart, Laopu (strong growth); 2) Anta, YUMC, BSD, Yili,Tsingtao (mature blue-chips); 3) WHG, Tingyi, UPC (dividend yield plays).

•July online merchandise sales were up 8.3% yoy (picking up from 4.7% inJun), and offline sales were up 2.3% yoy (slowing down from 4.8% in Jun).

•Top 5 yoy performing categories in July: Home appliances (+29% yoy),furniture (+21% yoy), telecom products (+15% yoy), office supplies (+14%yoy), and sporting goods (+14% yoy).

•Bottom 5 yoy performing categories in July: Auto/fuel (-2%/-8%), homebuilding materials (-1%), catering (-0%), medicine (+0%), and apparel &textiles (+2%).