Luxury goods retailers bear the brunt in sales downturn
Updated: 2015-09-02 09:34
By Oswald Chan in Hong Kong(HK Edition)
Plunging tourist arrivals and dwindling retail sales have forced more luxury-goods retailers in Hong Kong to prematurely terminate leases for their premises in prime shopping areas, while others have secured substantial rental cuts from landlords to stay afloat.
Locally-listed Emperor International Holdings Ltd has agreed to slash rents for five retail premises it leased to affiliate company Emperor Watch & Jewellery Ltd by up to 30 percent after October this year.
The key shopping area of Causeway Bay has been particularly hard hit, after seeing rents of retail premises there soar by 40 to 60 percent in 2013. Global real-estate advisory firm Colliers International has forecast that street-level rents in Causeway Bay, along with those in Central, Mong Kok and Tsim Sha Tsui, will fall by 15 percent this year.
Russell Street, once ranked by Cushman & Wakefield as the world's most expensive street, now bears the brunt of the rent cuts. Emperor Watch & Jewellery will terminate its retail shop lease on Russell Street after October. Property agency sources said the landlord has cut rents by 42 percent to get mid-range cosmetics retailer Bonjour to lease the premises previously occupied by Emperor Watch & Jewellery.
US-based leather bag maker Coach is the latest luxury brand to fall victim to slumping retail sales. Coach closed its flagship store on Queen's Road, Central, on Monday - two years before the expiry of the lease in October 2017 - having had to endure a monthly rent of HK$7.2 million.
The value of Hong Kong's retail sales in July fell by 2.8 percent to HK$37.6 billion year-on-year, according to the Census and Statistics Department. The sales value of jewelry, watches and clocks, as well as valuable gifts, declined by 5 percent during the same period. Sales of luxury goods had tumbled by nearly 16 percent in the first half of this year.
The plunge in July's retail sales value was partly dragged by the further slowdown in inbound tourism and the impact of the stock market turmoil in Hong Kong and on the mainland.
Visitor arrivals in Hong Kong in July dived 8.4 percent to 49.2 million year-on-year, compared to last year, registering the largest single-month decline in six years, Hong Kong Tourism Board data showed. The number of high-spending overnight visitors plunged 11.6 percent in the same month, dragging the hotel occupancy rate down to 85 percent, with average visitor stay reduced to 2.2 days.
Speaking before the Executive Council meeting on Tuesday, Chief Executive Leung Chun-ying said Hong Kong needs to maintain its hospitable image as declining visitor numbers are affecting tourism-related businesses.
He said he does not want to see any violence against tourists, and will not condone any action that hurts Hong Kong's reputation as a tourist city.
"Tourism is important for Hong Kong, especially in creating job opportunities for many at the grassroots level, and the government has spared no effort in promoting Hong Kong tourism overseas and on the mainland," Leung said.
Coach's biggest flagship store on Queen's Road, Central, closed on Monday. Key shopping areas in the city are feeling the pinch of declining visitor arrivals and lukewarm consumer sentiment. Parker Zheng / China Daily
(HK Edition 09/02/2015 page8)