Hong Kong. Some of Hong Kong’s biggest retailers have closed stores and frozen expansion plans in the past year in response to a drop in the number and spending power of their main customers, mainland Chinese tourists, a Reuters review of corporate filings shows.
Six out of the 10 retailers reviewed are listed on the Hang Seng consumer goods sub index and their corporate filings show that, on average, Chinese tourists account for the majority of annual sales.
All the companies had enjoyed years of strong sales growth, mainly due to these visitors’ voracious appetite for everything from watches to jewellery to cosmetics. That enabled the firms to put up with some of the world’s most expensive rents: three years ago, Hong Kong’s prime Causeway Bay shopping area beat New York’s Fifth Avenue to become the world’s priciest retail real estate.
But the Chinese tourists are now going elsewhere, deterred by cross-border political tensions that erupted last year and protests against mainland shoppers. Some are taking advantage of weaker currencies and shopping in South Korea and Japan.
Filings for four of the retailers — jeweler Chow Sang Sang Holdings along with casual wear brands Bossini International Holdings, Giordano International and I.T. Limited — show a single-digit decrease in the number of their store chains in the past 12 months.
Another four companies — cosmetics retailers Sa Sa International Holdings and Bonjour Holdings, luxury jeweler Emperor & Watch Jewellery and clothing brand Esprit Holdings — kept store numbers unchanged over the same period, the filings showed.
Only two retailers — jeweler Luk Fook Holdings International and Chow Tai Fook Jewellery Group — expanded their store network, by 4 percent, a slowdown from the more than 8 percent annual average growth rate they had recorded since 2009.
The drop in Chinese tourist numbers is also driving down shop rentals in Hong Kong. Some analysts forecast an up to 15 percent fall this year, but for some retailers the drop is not big enough to offset weak sales.
A Giordano spokeswoman said the company was reluctant to open new stores due to “crazily high” rents.
Chow Tai Fook also said it would shut two stores this year in tourist magnet areas Causeway Bay and the Peak, while rival Emperor & Watch Jewellery has similar plans.
“We try to bargain down everything [with landlords],” said an Emperor & Watch spokeswoman.
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