Under The Epidemic, &#34, Frozen &#34, Hongkong'S Retail Industry Plummeted By 76%!

Shopping paradise: Hongkong is facing difficulties.

According to the latest data disclosed by the Hongkong government statistics office, in January 2020, the total retail sales volume of Hongkong was HK $37 billion 800 million, down 21.4% from the same period last year. According to the retail category, the value of luxury goods such as jewellery, clocks and watches dropped by 41.6% over the same period last year.

Hongkong has always been recognized as a luxury paradise in the world. According to Bain consultancy data, luxury goods sales in Hongkong reached a peak of 10 billion euros in 2013.

But the share of the 5% of the world's luxury goods sales is decreasing.

Plummeting 76%! Sasa international and Zhou Dafu can't afford to lose.

Every Spring Festival is the peak season for Hongkong's retail industry. However, a sudden outbreak made the Spring Festival in 2020 the coldest winter in Hongkong's retail history.

In February 6, 2020, Sasa international disclosed the retail sales data during the 2020 Spring Festival (January 1 to July 7). During the period from January 25, 2020 to January 31st, Hongkong and Macao's unaudited retail sales fell by 76.9% compared with the same period last year, while the same store sales fell 75.5%.

Among them, retail sales in Hongkong dropped by 77.9% compared with 2019. Sasa International said it was mainly affected by the new crown pneumonia epidemic, and the number of visitors from the mainland expanded again, and the consumption desire of local consumers was also in the doldrums.

Data from the Immigration Department of Hongkong showed that the number of mainland visitors during the Spring Festival fell by 85.5% over the same period last year, resulting in a sharp decrease in the total volume of the mainland, resulting in a 54.4% drop in the total volume of transactions and a 92.1% drop in the number of mainland visitors.

The recession of Hongkong's retail industry is expanding under the epidemic. Zhou Dafu, Sasa, excellent and other famous retail enterprises have also brewed large areas.

In January 14th, Zhou Dafu Jewelry Group (01929.HK) said in an email notice that 15 shops will expire and will not renew their contracts in the future.

Just a day ago, Sasa International (178.HK) also announced that it would close 25 retail stores.

In order to save himself, Sasa International's executive director announced that he would cut his salary by 75% in the next three months and plan to lay off less than 3% of Hongkong's staff in order to save operating costs.

Against this background, Sasa International's performance in the two tier market is also unsatisfactory. Its share price has been dropping since 2019. By the end of March 4th, the stock price was only HK $1.47, which has fallen by 72.2% compared with June 2018's high point, with a total market value of HK $4 billion 562 million.

At the same time, yesterday (March 3rd), Citigroup issued a report that from February 2020 to March, Sasa international sales in Hong Kong and Macao will drop by 80% compared to the same period last year, and the profit forecast in 2021 and 2022 will be reduced by 45%, 19% to HK $108 million, HK $225 million, and the "sell" rating will be maintained.

Zhou Dafu, which is closely connected with Sasa international, has lost 15.89% of its stock price since January 23rd.

According to Zhou Dafu's earnings report, by the end of 2019, Zhou Dafu had 3789 business sites worldwide, most of which were located in the mainland of China, with only more than 100 outlets in Hongkong.

Although there are not many business outlets in Hongkong, it has contributed more than 30% of turnover to Zhou Dafu, and Zhou Dafu announced that 15 shops will no longer be renewed, which is inevitable for group revenue.

Luxury items are not sold, and sales are down 42%.

A direct manifestation of Hongkong's continued decline in retail sales is that sales of luxury goods have been hit hard.

According to statistics from the Hongkong census and Statistics Department, in January 2020, the value of luxury goods such as jewellery, watches and clocks and precious gifts dropped by 41.6%; drugs and cosmetics decreased by 32.3%; clothing decreased by 28.9%, and department stores fell 27%.

It is worth noting that the retail sales of Hongkong in the first two months of the year are generally affected by the Chinese New Year's time and fluctuate. The local consumption expenditure is usually at a seasonally high level before the lunar new year.

A spokesman for the Hongkong government said that although the lunar new year in 2020 was at the end of January and last year was early February, it should boost the performance of retail sales in January 2020, but sales continued to decline significantly in the same month.

As for the reasons, the spokesman pointed out that the threat of the new crown virus in 2019 has almost stopped the tourism industry in Hong Kong, seriously interfered with consumption related activities, and the business environment of the retail industry has become more and more serious recently. The government will closely monitor the situation and its impact on the overall economic and employment market.

However, the January tourism statistics released by Hongkong Tourism Bureau showed that the number of visitors to Hong Kong in January was 3 million 207 thousand and 800, a year-on-year decline of 52.7%, of which 2 million 536 thousand and 800 in mainland China (79%), down 54.2% from the same period last year, and 671 thousand in the mainland of China, a decrease of 46% over the same period last year.

With the development of the epidemic, the government of Hongkong only left Hong Kong Zhuhai Macao Bridge port, Shenzhen bay port and Hong Kong International Airport. At the same time, visitors were asked to quarantine for 14 days. This also means that the number of visitors to Hong Kong will drop further in February.

Luxury stores are being evacuated from Hongkong.

The reason why Hongkong can become the top five luxury shopping paradise in the world is also mainly due to the purchasing power of consumers. The impact of reduced passenger traffic on Hongkong's retail industry has already begun to appear in the second half of last year.

Earlier, Bain data showed that Chinese consumers contributed nearly 35% of sales to the global luxury market, and 90% of the luxury market in 2019 also benefited from Chinese consumers.

Bain believes that Chinese tourists are always keen on patronizing the luxury market in Hongkong, where they can buy luxury goods at a more favorable price. But the situation in the second half of 2019 has caused heavy losses to the Hongkong market.

The well-known reason has forced the luxury stores to close, and the number of tourists has also declined significantly. Many tourists have cancelled plans to travel to Hongkong. Hongkong's personal luxury industry has been severely affected and has begun to shrink.

Russell street, located in Tongluowan, Hongkong, is known as "the most expensive street in the world" with high rent and luxury stores. The street, which is only 250 meters long, is regarded as a barometer of the sale of luxury goods in Hongkong.

But since 2020, luxury goods companies have announced that they are closing down, and some luxury goods are being withdrawn from here.

According to media reports, due to the high rent, Prada plans to close the store in Tongluowan, Hongkong, Plaza 2000 in 2020. Previously, Prada signed a 7 year lease with the property at HK $9 million per month, expiring in June 2020.

In the early January 2020, according to the interface news, French luxury brand Louis Vuitton (Louis Weedon) also intended to withdraw the flagship store in Times Square on Russell street.

It is worth mentioning that the rental of Russell street is very expensive. The rent per square foot (about 0.09 square meters) per year is 2745 dollars (19 thousand yuan), which is more expensive than the Fifth Avenue in New York. It is the most expensive shopping street in the world.

Retail sales in the luxury sector are depressed because of the sharp decline in mainland visitors. In the past crowded streets in Tongluowan, tourists could hardly be seen.

Retail "ice", Hongkong core shops vacancy rate is high.

Today (March 4th), a survey of street shops in the United States industrial and Commercial Association showed that the number of vacant shops in the four core business districts (Tsim Sha Tsui, Mong Kok, Tongluowan and central) surged to 689 in 2020 1-2, with a vacancy rate of 9.2%, a record high.

The survey data contain 7503 shops in 156 streets, and the vacancy rate in Tongluowan is as high as 12.2%, which is the highest in the whole business district. 133 of the 1094 street shops in the region are vacant. The vacancy rate of the four districts rose all the way, mainly in the traditional tourist areas. In the tourist area, Tsim Sha Tsui, the retail market and the mainland tourists were reduced. The vacancy rate increased by 4.1 percentage points to 10.9% in the past half year. The increase was the highest among the districts.

Lu Zhanhao, director of the United States industrial and commercial bank, believes that the current situation is even worse than the SARS period in 2003. Because the scale of the epidemic is large and it is difficult to have another "personal tour" measure to stimulate Hongkong's economy, the market prospect is very optimistic.

In the face of the cold winter of Hongkong's retail industry, in March 1st, Chen Maobo, the financial secretary of Hongkong, said:

Recently, in the communication with the public, we really felt the chill of Hongkong's economy. Some shops even faced the "frozen" business environment.

Although the economy of Hongkong is in the cold winter now, Hongkong's economy will rebound significantly after a low tide.

Recalling the plight of Hongkong in the past, whether it was the Asian financial turmoil of 1998, the SARS epidemic in 2003, or the financial tsunami of 2008, the economy tended to have a significant rebound after a low tide.

According to Chen Maobo's prediction, the average annual economic growth can reach 2.8% in the four years from 2021 to 2024, which is only slightly lower than the trend growth of 2.9% in the past ten years.