Weak growth in Hong Kong pushes Sa Sa to shut down 6 stores

Mostly will be from China.

It has been reported that Sa Sa had a net decrease of six stores and counters for its network in 1Q, mostly from China.

According to a research note from Barclays, the number of stores in Hong Kong, Macau and Singapore remain unchanged.

However, stores in Mainland China decreased by six, stores in Malaysia increased by one and stores in Taiwan decreased by one.

As of 30 June 2014, the Group’s retail network had a total of 274 stores, including eight single-brand counters/stores, Barclays noted.

Meanwhile, Sa Sa has reported 1QFY15 (April-June) operational data, and it has been stated that 1QFY15 Hong Kong (HK)/Macau sales were +5.3% y/y and SSS growth was +1.9% y/y, continuing to see weak growth.

Here's more from Barclays:

This set of data is similar to the data for the period 1 April -21 June (sales were +5.4% y/y on SSS of +1.5% y/y) that Sa Sa disclosed at its FY14 results briefing, and therefore we believe this set of weak results should be largely anticipated by the market.

Average sales per transaction in 1Q were down by 3.4% y/y although the number of transactions continued to grow by 9.6% y/y.

For the group as a whole, Sa Sa recorded 4.9% y/y growth in turnover. Sa Sa’s other segments (China, Taiwan, Singapore, Malaysia, sasa.com) recorded 3.3% y/y turnover growth during the quarter.

Our current estimates for Sa Sa already factor in a pick-up in sales growth in the remainder of the year (we assumed FY15 HK/Macau sales growth at 7.4%) and we look for 9% earnings growth in FY15E.

With these assumptions, the stock is still trading at 16.4x FY15E P/E and 14.9x FY16E P/E; we believe the stock is fully valued as we only expect Sa Sa to see 10% earnings CAGR over FY14-16E.