HONG KONG • The impact from the Hong Kong protests is spreading to global luxury retailers, with jewellery and cosmetics getting hurt as shoppers and big-spending travellers stay away.
Swiss luxury-goods maker Richemont became the latest casualty, saying on Thursday that the street demonstrators have dealt a blow to local sales. The owner of Cartier and Van Cleef & Arpels echoed Swatch Group in saying that the unrest in Hong Kong, the top export market for Swiss watches, weighed on sales due to store closures and lower tourist arrivals.
With restaurants and consumer brands already affected, retailers now face a widening disruption as shops from the city centre to Hong Kong's suburbs have been forced to close early due to a lack of customers. A peaceful gathering of tens of thousands of protesters last Sunday turned into a fight with the police at a mall in Sha Tin on the city's outskirts.
LVMH and Kering are scheduled to report first-half earnings next week, potentially giving more insight into how badly the luxury sector is affected.
TRAVEL IMPACT
The historic demonstrations have been triggered by Hong Kong Chief Executive Carrie Lam's bid to make it easier to carry out extraditions to the mainland. The proposal has prompted hundreds of thousands of protesters to take to the streets, bringing parts of the city to a halt since early last month.
HSBC estimates that 350,000 mainland Chinese tourists will stay away this year because of the unrest, the South China Morning Post reported. Flight bookings from Asia - excluding the mainland and Taiwan - to Hong Kong fell 5.4 per cent in the period from June 16 to July 13, according to researcher ForwardKeys.
Singaporean Charles Kee, who has booked a flight to Hong Kong for next month, said he will cancel the trip if the violence escalates.
"Hong Kong is a pretty small place, so if tourists want to try to avoid possible protest areas, there may not be enough things for us to do," he said.
BAD TIMING
The setback comes at an inopportune time for retailers already facing headwinds from the trade war, a depreciating Chinese currency that lowers mainland tourists' purchasing power and the threat of a global recession affecting consumer spending, said senior analyst Jennifer So of Lego Asset Management in Hong Kong.
"Retailers that rely more on tourist spending or discretionary spending like jewellery and cosmetics, and hoteliers will suffer the most," she said. "Online spending and e-commerce will fare better."
The Hong Kong Retail Management Association said on Tuesday that most of its members reported a single-to double-digit drop in average sales revenue between last month and the first week of this month, when multiple demonstrations converging on major office and retail districts took place.
Among those affected were Sa Sa International Holdings, a seller of cosmetics, which reported a 15.3 per cent drop in same-store sales in Hong Kong and Macau for the three months through June. For the same period, Chow Tai Fook Jewellery Group posted an 11 per cent decline.
Possibly easing the retailers' pain is an expected decline in store rents caused by the protests. Rent for street shops is set to drop 5 per cent during the second half of the year, said Mr Simon Smith, who heads Savills Research & Consultancy in Hong Kong.
"The retail market is not looking good in the second half," he said.
BLOOMBERG
