S&P predicts strong sales in department stores

Chinese department stores could face tougher times ahead with slower growth, but retail sales should remain robust, Standard & Poor's Ratings Services said on May 15.

Standard & Poor's said it expects a stable outlook for the sector.

Department stores operate under two business models in China: concessionaire and direct sales. Standard & Poor's expects the concessionaire model to remain the dominant format in China for the department store business in the next three to five years.

"China's urbanization and government policy to boost domestic spending will further support retail sales growth," said Standard & Poor's credit analyst Lillian Chiou. "Also, the spending power of urban dwellers has continued to increase with the nation's growth.

That has led to stores carrying more high-end brands in top-tier Chinese cities, such as Beijing and Shanghai."

According to the China Shopping Center Development Association, the number of shopping malls in China will reach at least 7,000 by the end of 2025.