ANALYSIS: Retailers uncertain about sector prospects for 2008

Major retailers posted gains in annual revenues last year, thanks to strong anniversary and year-end promotions. But company officials and market watchers have mixed feelings about this year's prospects as a result of market uncertainties.

Although most retailers recorded healthy sales last year, with Far Eastern Department Stores Ltd (遠東百貨) and some consumer electronics chains reporting double-digit sales growth, the retail sector is expected to lack momentum this quarter, Andre Chang (張致竑), an analyst at Citi Investment Research in Taipei, said in a client note dated Friday.

"We still believe the first quarter of 2008 will be a quiet period for domestic consumption given the uncertainty surrounding the two elections and the higher comparison base," Chang said in the note.

Far Eastern Department Stores, a subsidiary of Far Eastern Group (遠東集團), saw revenues rise 10.41 percent year-on-year to reach a 10-year high of NT$20.64 billion (US$635.8 million), a filing to the Taiwan Stock Exchange on Friday showed. Last month's sales increased by 8.7-percent to NT$1.63 billion.

Meo Cheng (鄭嘉蕙), manager of Far Eastern Department Stores' public relations department, attributed the company's strong performance last year to increased efforts to expand product lines.

"We have carried foreign, well-known brands at stores in Taoyuan and in other areas outside Taipei where we had not previously, so that consumers did not have to travel too far," Cheng said on Friday.

Pacific Sogo

Pacific Sogo Department Store (太平洋崇光百貨), another subsidiary of the Far Eastern Group, posed NT$35 billion in revenue last year, up 18 percent from a year ago. Pacific Sogo's sales growth this year, however, will depend on whether the new Tianmu store opens on schedule in the fourth quarter, Cheng said.

Shin Kong Mitsukoshi Department Store (新光三越百貨), the nation's largest department store chain, reported revenue of NT$60.9 billion last year, up 2 percent from the previous year, company spokeswoman Shauna Lee (李香萩) said on Friday. The retailer is targeting a 5 percent growth in annual revenues this year.

President Chain Store Corp (統一超商), which runs the nation's largest 7-Eleven convenience store franchise, expanded its revenues by 2.38 percent to NT$102.33 billion last year, following a 2.64 percent increase in sales last month to NT$8.4 billion, the company said in a statement released last week.

Hola Home Furnishings Co (和樂), the nation's largest home furnishing and decorations retail chain, saw annual revenues advance 4.77 percent to NT$3.18 billion, while Tsann Kuen Group (燦坤實業), the nation's biggest home appliances and consumer electronics chain, said revenues grew 12.78 percent to NT$33.34 billion, according to filings issued last week.

consumer confidence

But with the uncertainties surrounding the elections and inflation, an economist said he doubted there would be any significant improvement in consumer confidence in the first half of the year.

"The consumer confidence index will not improve substantially until the second half of the year," Shia Ben-chang (謝邦昌), a professor in Fu Jen Catholic University's statistics and information science department, said on Saturday after the Chinese Nationalist Party (KMT) won a landslide victory in the legislative elections.

The Democratic Progressive Party (DPP) has vowed to retain the presidency to avoid a political disaster for the party, increasing market uncertainties ahead of the March presidential election.

Last month, consumer confidence weakened to a six-year low, with the index dropping for the fourth-straight month to 62.58, according to statistics released on Dec. 28 by National Central University's Research Center for Taiwan Economic Development.

prices

Consumer prices climbed 3.34 percent last month from a year earlier, down from November's 4.8 percent rise and the 5.3 percent increase in October, the government's statistics bureau said last Monday.

Lee said the retailer had noticed a decline in shoppers last year. She said consumer confidence would probably remain weak this year.

"Last year, there was a trend toward rational consumption, with consumers shopping at specific times, such as Mother's Day and during our annual sales," Lee said.

However, she said that the 40 to 49 consumer age group had increased noticeably last year as this group appeared to be less affected by economic woes as a result of their stable incomes.

Purchases by consumers aged between 20 and 29, meanwhile, showed that this group had finally recovered from the credit problem which beset the market for two years, Lee said.