Hong Kong | Retail sales see biggest contraction since 1998

The retail sector in Hong Kong recorded the poorest annual sales in nearly two decades last year, according to a report by the Nikkei Asian Review. The HKSAR government partly attributed this to the declining number of Chinese tourists visiting the territory.

Retail sales in Hong Kong recorded HKD436.6 billion last year, a decrease for the whole year of 8.1 percent from 2015, marking the sharpest decline since the Asian financial crisis in 1998 when sales plummeted 17 percent year- on-year.

Nevertheless, analysts say that there are signs of gradual recovery in the number of Chinese tourists and in the performance of retail sales in the latter half of last year.

Last year, retail sales fell in every month, however the year-on-year declines waned in the latter months, moving from a 5.5 percent year-on-year decrease in November to 2.9 percent in December.

According to the Nikkei Asian Review, the Hong Kong government attributed the narrowing decline to growing local consumption and an increasing volume of mainland visitors.

“The near-term outlook for retail sales business will still depend on whether the recent improvement in inbound tourism could gain more traction and the extent to which local consumer sentiment will be affected by various external uncertainties,” a Hong Kong government spokesperson told the agency.

The number of mainland visitors to Hong Kong in December showed a reversal after months of decline. Led by the Christmas holidays, the number of visitors increased by 9 percent year-on- year, outperforming the growth observed in Macau of a 7.8 percent year-on- year increase that month.

Moreover, Macau’s “Business Climate Survey” in November last year, which seeks to measure the near-term outlook of retailers and restaurants in the territory, showed that less than one-quarter of retailers expected year-on-year growth in the following month, December 2016.

In line with expectations that the slowdown in retail sales may be approaching an end, the proportion of retailers that recorded a decline in sales in November decreased by five percentage points to 41 percent. DB

Luxury retailers say sales suffered

Luxury and  upmarket retailers, some of which operate in Macau and Hong Kong, note that their sales suffered last year. Jewelry group Chow Sang Sang issued a profit warning last month that its full-year earnings for 2016 could drop as much as 40 percent. Meanwhile, fashion retailer Bauhaus closed four shops across the two SARs, while the same store’s sales declined 10 percent year-on-year in the final quarter of 2016. Rival firm, I.T, recorded a slightly better 4.6 percent decline in store sales in Hong Kong during the three-month period between September and November 2016. Many luxury retailers in Macau and Hong Kong depend on visitation from mainland China as their main source of revenue.