Shares of SUNART RETAIL (06808) have fallen sharply, dropping over 8%. At the time of writing, the stock is down 8.06% to HK$1.14, with a turnover of HK$42.047 million.

Recent analysis from Morgan Stanley indicates that the company's revenue continues to face significant pressure from intense market competition and subdued consumer demand. Furthermore, the recovery in average customer spending remains uncertain.

Management has projected that revenue for the 2027 fiscal year will be flat or show only slight growth compared to the previous year. They anticipate a return to profitability, driven by improvements in product competitiveness, store reforms, expansion of the private label business, and growth in online sales.

However, the 2027 fiscal year is still viewed as a period of investment and execution. The firm expressed a desire to see more concrete evidence of a rebound in customer spending and enhanced store productivity.

Due to pressures on the offline and B2B segments, coupled with a decline in rental income, Morgan Stanley has revised its revenue forecasts for Sunart Retail downward. The estimates for the 2027 and 2028 fiscal years have been cut by 10% and 11%, respectively.

Concurrently, the firm has also lowered its gross margin assumptions by 0.4 percentage points for each of those fiscal years.

The combined impact of these reduced revenue and margin projections has led to significant cuts in net profit forecasts. Morgan Stanley has slashed its net profit estimates for Sunart Retail by 95% for the 2027 fiscal year and by 63% for the 2028 fiscal year.