One Shit Breaks Up A Pot Of Soup: Fewer Tourists From Mainland China, Who Knows Who To Buy Luxury In Hongkong?

Hongkong's retail industry has been hit hard and has become a heart of luxury and fashion brands.

According to the fashion business news, Cartire's parent company, the peak group, dropped more than 4.5% today, the Swatch group of the Swiss watch group fell 5%, LVMH fell 2.9%, the open cloud group fell 2.15%, Hermes fell 2.12%, Prada was optimistic about the profit rise in the first half of this year, and the trend increased by more than 2%.

Hongkong sales have played an important role in luxury brands, contributing 5% to 10% of the sales of luxury brands worldwide. The sales of LV parent LVMH group in Hongkong account for 8% to 9% of its total turnover, while the core brand Gucci of Kai Yun group's sales in Hongkong account for about 10% of its total turnover.

At the same time, retail stocks in Hongkong generally fell today. The retail price of jewelry retailing in the early morning of the group was severely damaged, with a drop of more than 7%, the lowest in two and a half years. Sasa international fell 7%, a three year low, while Zhou Dafu dropped more than 3%.

Hong Kong stocks in the doldrums implicated in the Hong Kong listed fashion retail enterprises, the domestic apparel group Jiangnan cloth clothing recorded a decrease of about 4%, the domestic menswear brand GXG parent company mosang Group Holdings fell more than 3%, Anta sports fell 2%, XTEP international fell 4%, Li Ningdie 1.7%, luxury luggage brand Samsonite fell 4%. Citigroup published a research report entitled "a miserable summer". It believes that the forecast of Hongkong retail share profit will be reduced to 6% to 27% by the recent uncertainty, and the outlook for same store sales will be weakened.

According to the data released earlier by the Hongkong Retail Management Association, Hongkong's retail sales figures for June fell five months, and the decline was further widened. During the period, the total retail sales value was 35 billion 200 million yuan, down 6.7% from the same period last year. It has been down for fifth months, and the volume of domestic sales is even more slippery than 7.6%. Not only is it far below market expectations, it is 1.9%, but also the biggest decline in the single month since August 2016, excluding the Lunar New Year factor from 1 to February, which is the worst retail performance in the past 3 years.

Among them, retail sales of jewellery, clocks and luxury goods fell the largest, down 17.1% compared to the same period last year, but fell by only 2.9% in May. Drugs and cosmetics related to consumption in mainland China fell by 4.1%. The Hongkong Retail Management Association also predicted that sales in July and August would be even more severe, with a decline of two digits.

The Hongkong market has a very high strategic position in the luxury industry. Despite the continued blowout of luxury goods in mainland China, Hongkong is still regarded as an Asian barometer of Luxury Retailing. But the instability of the past eight weeks is causing consumers to sniff at the favorite holiday resorts of the once rising global consumer class. Chinese tourists are losing fast, and Hongkong's luxury retail industry, which is heavily dependent on tourists, is almost stagnant.

The Hongkong Federation of trade unions said that the occupancy rate in June dropped by 20% compared to the same period in July and 40% in July. Some local tourism practitioners revealed that about 2/3 of mainland Chinese consumers cancelled their reservations. At the same time, the implementation of the luxury tariff and the new electricity supplier law in the mainland of China is reducing the attractiveness of Luxury Retailing in Hongkong.

Zhou Dafu announced the first quarter operating data as of the end of June this year. During the period, retail sales in mainland China and Hong Kong and Macao increased by 24% and 6% respectively. The same store sales in mainland China recorded a year-on-year growth of 11%, while Hongkong and Macao fell by 11% year-on-year, mainly due to the high base number and the uncertain macroeconomic environment.

According to Bloomberg report, a sales representative at Gucci store in Tongluowan shopping district said that before June, the store where he worked had one customer per minute, but now it is 3 to 4 per hour, and daily sales are reduced from HK $100 thousand to HK $20 thousand. He worries that the downturn will continue until October, and performance pay will be worrying. Some analysts say that if sales are deteriorating, it is inevitable that luxury retailers will be laid off.

Andre Hoffmann, vice chairman of L'OCCITANE L Occitane, last week, told analysts' conference call after the earnings report last week that the company lost several trading days in the second quarter, and the consumption of Chinese tourists in stores has declined. L'OCCITANE thinks Hongkong is the fourth largest market in the world, and its sales in Hongkong dropped by 19% in the second quarter.

Prada, a listed company in Hongkong, which has just released its first half financial results last Thursday, believes that although the group's performance in the mainland market is outstanding, the instability and exchange rate factors of the retail industry have been dragging down the growth. (extended reading: can depth |Prada return to the first tier of luxury goods?)

Jeans brand Levi's was also affected by the board meeting in Hongkong in June. The German menswear group Hugo Boss has closed a store in Hongkong airport and a local shopping mall. Yves Mueller, chief financial officer, said at a conference call after earnings that the group's performance in Hongkong was inferior to that in the mainland of China. Patrice Louvet, the chief executive of Ralph Lauren, the US luxury brand, said Hongkong's retail downturn was also implicated in Macao's market performance.

French luxury brand Chanel announced earlier in November 6th that it will hold the 2019/2020 spring holiday series fashion show at Eic cruise terminal in Hongkong on the official social media account earlier. However, at present, the brand has not released any relevant news on the official account of China, indicating that the brand remains cautious and wait-and-see. (extended reading: depth, this time, why did Chanel choose Asian luxury heart show?)

Hongkong is also the largest export market for Swiss watches. In June, the import of Swiss watches fell by 26.8% to 198 million 400 thousand Swiss francs. In the first half of the year, the Swiss watch exported to Hongkong market fell 6.6% to 1 billion 448 million 700 thousand Swiss francs, making Swiss peak group and Swatch Swatch group become the hardest hit in the luxury industry. Two companies have issued a statement earlier saying that Hongkong's depressed market has put pressure on sales due to the closure of stores and the reduction of tourists. Swatch group said Hongkong's sales fell by two digits.

Zheng Anqi, economist at CMB international Vantage Capitals Ltd, revised the retail sales forecast for 2019 to 10%, two times the previous forecast. Brokerage firm CLSA lowered the Zhou Dafu rating and said that the reduction in mainland Chinese tourists could cause long-term damage to growth.

Annie Tse, chairman of the Hongkong Retail Association, said that the retail industry also needs time to recover. Tourists need to restore confidence in Hongkong. Local retail practitioners say the downturn may last until the end of this year and even affect the most critical Christmas season sales.

It is noteworthy that according to the magazine Forbes magazine released the top 50 richest list of Hongkong in 2019, the wealth of the richest people in Hongkong has also shrunk. Wu Guangzheng, the boss of Kowloon warehouse and LCF, was 10 billion 800 million, ranking seventh, which shrank by 2 billion 200 million dollars compared with last year. Harbour City, located in Tsim Sha Tsui and the two high-end shopping malls in the Golden Square of times square in Tongluowan, have been a large number of mainland tourists visiting China, and also a cash cow in Kowloon warehouse.

However, L'OREAL CEO Jean-Paul Agon said the only good news is that if Hongkong's mainland Chinese tourists decrease, they will spend more on the mainland market. He thinks it will be a favorable wind rather than a headwind. Author: Drizzie