Brands in Hong Kong expand again as retail sales recover

Giordano International

13/02/2018 09:36

By Donny Kwok 
    HONG KONG, Feb 13 (Reuters) - Retailers in Hong Kong such as 
Chow Tai Fook  1929.HK , the world's No. 2 jeweller after 
Tiffany's  TIF.N  by market capitalisation, are expanding again 
in a sign of confidence for a sector critical to the economy. 
    A pick-up in visitor arrivals from mainland China and strong 
local demand buoyed by robust stock and property markets have 
boosted consumer confidence, which translated into retail sales 
rising 2.2 percent in 2017, the first increase in three years. 
    Consultant PwC expects retail sales growth to quicken to 4-6 
percent this year and to remain firm for several years after 
that. The volume of retail sales last year rose 1.9 percent 
after two straight years of decline.  urn:newsml:reuters.com:*:nL4N1PR3R1 
    Retail sales are critical for the economy. When 2017 GDP 
figures are published, analysts expect them to show that retail 
sales produced 17 percent of the economy's growth and about a 
tenth of its jobs. 
    Like many other brands, Hong Kong-listed Chow Tai Fook had 
closed stores in recent years. It said it opened three new shops 
in Hong Kong between October and December 2017 and plans further 
openings, including in neighbouring Macau. Including mainland 
China, the brand increased its stores to 2,565 in 2017 from 
2,377 in 2016. 
    "The outlook for the jewellery sector in Hong Kong this year 
is positive against the backdrop of a recovering economy in 
mainland China ... and the booming stock and property markets 
that create a positive wealth effect," the company said in a 
statement to Reuters. 
    Other stores will follow Chow Tai Fook's suit, figures from 
real estate services company Colliers International suggest. It 
predicts that 1.38 million sq ft of new retail space will come 
onto the market in the core shopping districts of Hong Kong in 
2018, a sharp increase from 327,000 sq ft in 2017. 
    Chow Tai Fook's smaller rival Luk Fook Holdings  0590.HK  
added two stores in Hong Kong in the final quarter of 2017 and 
jeweller Chow Sang Sang  0116.HK  said it might open more shops 
in Hong Kong. 
    Skin care and cosmetics brand L'Occitane International 
 0973.HK  increased its stores in Hong Kong to 36 in 2017 from 
34 in 2016 and rival Sa Sa International  0178.HK  added four to 
take its total to 119 in 2017. 
     
    REBOUND IN TOURISM 
    Visitors to Hong Kong from the Chinese mainland are rising 
again, which has helped boost retail sales. Their numbers 
increased 3.9 percent in 2017 after falling 6.7 percent in 2016. 
Total visitors also increased in 2017 after declining in 2015 
and 2016. 
    One attraction for Chinese mainland visitors to Hong Kong is 
that imported goods are often cheaper than in China due to lower 
tariffs. 
    A Hong Kong jobless rate of less than 3 percent - the lowest 
in nearly 20 years - is also boosting confidence and analysts 
said there is little pressure on retailers to pay higher rents, 
allowing them to keep costs under control. 
    "There are still many empty shops on the streets, absolutely 
it is not a time for raising rents," said Joe Lin, executive 
director, advisory and transaction services, retail at property 
services group CBRE in Hong Kong. 
    "I don't believe we will see a significant rebound in retail 
rent in the next 12 months," he said. 
    Colliers said favourable rents on first-tier high streets 
were driving demand for shops in prime locations although 
brands, including Major League Baseball (MLB), Swedish watch 
brand Daniel Wellington and Swiss luxury watch maker Carl F. 
Bucherer, were opting for smaller stores of around 1,000-5,000 
square feet rather than bigger ones. 
    "International mid-market fashion and lifestyle brands are 
thriving, new F&B (food and beverage) concepts continue 
expansion, luxury watches and jewellery demand continue a slow 
recovery," it said. 
 
 (Reporting by Donny Kwok; Writing by Anne Marie Roantree; 
Editing by Neil Fullick) 
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters 
Messaging: donny.kwok.reuters.com@reuters.net)) 
 
Keywords: HONGKONG ECONOMY RETAIL/