January 15, 2020 / 10:58 AM / 12 days ago

Retailers Chow Tai Fook, Sa Sa to trim store networks in Hong Kong tourist areas

HONG KONG (Reuters) - Hong Kong retailers are retreating from the city’s protest-hit tourist areas as visitor arrivals drop, with a top jeweler and cosmetics chain pulling out of prime shopping districts such as Causeway Bay and Tsim Sha Tsui.

FILE PHOTO: A salesperson arranges 24K gold bracelets for Chinese weddings at Chow Tai Fook Jewellery store in Hong Kong, China December 14, 2017. REUTERS/Tyrone Siu/File Photo

Jewellery chain operator Chow Tai Fook Jewellery Group Ltd (1929.HK) said on Wednesday it would review the performance of more than 40 points of sale (PoS) with leases set to expire in the 2021 financial year, and planned to close up to 15 of them, many located in the tourist districts of Causeway Bay, Mong Kok and Tsim Sha Tsui.

“As said in our interim results in November 2019, the group would seek PoS network optimization in Hong Kong to enhance store profitability,” a company spokeswoman told Reuters in an email reply, adding there was nothing new in its direction.

Chow Tai Fook, which operates a total of 3,789 PoS, including about 80 in Hong Kong, said it planned to open about 600 PoS in China in the financial year ending March 2020.

Its same-store sales in Hong Kong and Macau fell 38% in the October-December quarter from a year earlier, while same-store sales in mainland China rose 2%.

Skin care and cosmetics chain operator Sa Sa International Holdings Ltd (0178.HK) said on Wednesday around 20% to 25% of its stores in Hong Kong were tentatively earmarked for closure in the next 18 months, with most of them in tourist areas.

Sa Sa said its retail and wholesale turnover in Hong Kong and Macau fell 35.2% in October-December, while same-store sales dropped 34.7%. The number of transactions by mainland Chinese tourists dropped 50.8%, while those from local customers fell 9.1%.

Anti-government protests have rocked the Chinese-ruled city for more than seven months, taking a heavy toll on the economy, in particular the tourism and retail sectors.

“As store rental is one of the largest operating expenses, the group has begun to downsize its store network according to store performance, business circumstances in each district and the extent of rental reduction,” Sa Sa chairman Simon Kwok said in a statement.

The group will negotiate with landlords on rental reductions in a bid to restore profitability, he added.

Sa Sa operates 265 stores in total, including 115 in Hong Kong and Macau.

The Hong Kong Tourism Board (HKTB) said on Wednesday full-year visitor arrivals in 2019 were 55.9 million, down 14.2% from a year earlier. It said arrivals rose 13.9% in the first half, but plunged 39.1% in the second, when anti-government protests plunged the city into crisis.

“Hong Kong’s tourism industry has faced exceptional challenges over the past year,” HKTB chairman YK Pang said in a statement.

The Hong Kong Retail Management Association (HKMA) estimates about 7,000 businesses, or more than one in 10 retailers, will be forced to close in the next six months.

Hong Kong retail sales fell 23.6% in November for the tenth consecutive month of declines.

Reporting by Donny Kwok; Editing by Anne Marie Roantree and Mark Potter

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