Hong Kong retail sales drop by steepest in 3-1/2 years amid protests (updated)

Luk Fook Holdings (International)

30/08/2019 11:13

* July retail sales value drops 11.4% y/y, 6th month of
decline
    * July tourist arrivals down 4.8% y/y, 1st decline since Jan
2018 
    * Mainland inbound tours cut by over 90% - tours association
    * Govt says situation may deteriorate 

    By Donny Kwok and Twinnie Siu
    HONG KONG, Aug 30 (Reuters) - Hong Kong's July retail sales
sank by the most since February 2016 amid anti-government
protests that have gripped the Chinese-ruled city for months.
    Retail sales in July fell 11.4% from a year earlier,
government data showed on Friday, as social unrest hurt consumer
sentiment and visitor arrivals started to fall. 
    Unrest in Hong Kong escalated in mid-June over a
now-suspended extradition bill that would have allowed people to
be sent to mainland China for trial in Communist
Party-controlled courts.
    The protests, which at times have turned violent, have
evolved into broader calls for democracy for the former British
colony which returned to Chinese rule in 1997.  urn:newsml:reuters.com:*:nL3N25P0EH
    Retail sales fell to HK$34.4 billion ($4.4 billion) in July,
a sixth consecutive month of declines. June's decline was 6.7%.
In volume terms, retail sales in July fell 13%, compared with a
7.6% fall in June.
    For the first seven months of 2019, retail sales fell 3.8%
in value from a year earlier and 4.4% in volume terms.
    Many businesses in Hong Kong are already facing strains from
China's economic slowdown, a weak Chinese yuan and fallout from
the Sino-U.S. trade war, while businesses say violence has added
to the toll on tourism and the pivotal retailing industry.
    "The situation may deteriorate further if the social
incidents involving violence do not come to a stop," a
government spokesman said, adding Sino-U.S. trade tensions and
subdued economic conditions continued to dampen sentiment.
    Banks are issuing unprecedented profit warnings, while
hotels and restaurants are half empty. Several global events
have been postponed and economists say retail sales, a key
economic pillar in the Asian financial hub, could drop by
20%-30% this year.
    Hong Kong is also facing its first recession in a decade,
with the government recently cutting its full-year 2019 growth
forecast to 0-1%, down from 2%-3% previously.  urn:newsml:reuters.com:*:nL4N25B1WC
    The Hong Kong Retail Management Association urged landlords
to halve rents for six months and expected some retailers may
have to sack staff or even shut down.  urn:newsml:reuters.com:*:nL4N25I2BV
    
    TOURISM HIT
    Retailers had said they expected sales for July and August
to drop by double-digit percentage points from a year earlier,
while hoteliers are bracing for a wave of cancellations. 
    The city's Federation of Trade Unions said hotel occupancy
rates fell 20% in June from a year earlier, and probably 40% in
July.
    Tourism, especially from mainland China, has dropped
markedly. Britain, Japan, Singapore and others have issued
travel alerts.  urn:newsml:reuters.com:*:nL4N24V2LB
    "Tours from the mainland dropped by more than 90% in August,
and many related workers were forced to take no pay leave," Paul
Leung, chairman of Hong Kong Inbound Travel Association, told
Reuters. He said the number of mainland tours had been cut to
only 14 a day from 300-400 tours in the same period in 2018.
    July tourist arrivals fell 4.8% on year to 5.197 million,
according to the Hong Kong Tourism Board, the first decline
since January 2018 and the biggest percentage drop since August
2016. (https://bit.ly/30UNM05)
    That compared with 8.5% growth in June. Mainland visitors
fell 5.5% in July, accounting for 80.1% of the total. 
    New York-based luxury jeweler Tiffany & Co  TIF.N , which
operates 10 stores in its fourth-largest market in Hong Kong,
said protests disrupted business.  urn:newsml:reuters.com:*:nL3N25O2RN 
    Department store operator Lifestyle International  1212.HK 
said outlook for the city's retail sector was challenging as
people lose the appetite to consume.  urn:newsml:reuters.com:*:nFWN257006
    Jewellery retailer Luk Fook  0590.HK  saw its same store
sales in Hong Kong and Macau fell 10% in the April-June quarter,
while smaller rival Chow Sang Sang  0116.HK  recorded an annual
double-digit percentage drop in same store sales in June.
 urn:newsml:reuters.com:*:nFWN24I0TU urn:newsml:reuters.com:*:nFWN25O0CC
    "Well into the third quarter there is still no end in sight
for the civil unrest in Hong Kong," said Chow Sang Sang chairman
Vincent Chow. 
    The Hong Kong Retail Management Association has changed its
full-year retail sales forecast to a double-digit percentage
fall instead of single-digit growth. 
    Sales of jewellery, watches, clocks and valuable gifts
plunged 24.4% on-year in July, data showed, after a 17.1% drop
in June.
    Medicines and cosmetics fell 16.1% in July, compared with
revised 4.5% fall in June. Department store sales dropped 10.4%
in July, against a 6.0% drop in June.
($1 = HK$7.8430)

 (Editing by Nick Macfie and Jacqueline Wong)
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters
Messaging: donny.kwok.reuters.com@reuters.net))