Retail sales in record plungeTop News | Stella Zhai and agencies 3 Oct 2019
Hong Kong's retail sales in August dropped to the worst on record, with total sales value slumping 23 percent from a year earlier as the months-long protests take a larger toll on the city's economy.
The total retail sales value in August shrank for the seventh consecutive month to HK$29.4 billion, worsening from an 11.5 percent year-on-year decline in July and far below the market expectation of an 11.4 percent decrease.
The shortfall in the volume of total retail sales, meanwhile, enlarged from a negative 13.1 percent in July to 25.3 percent in August compared with a year ago.
Analyzed by the broad type of retail outlet, the sales value of jewelry, watches and clocks, and valuable gifts - which are common purchases by mainland tourists - plunged by 47.4 percent, followed by wearing apparel (-33.4 percent), medicines and cosmetics (-30 percent) and commodities in department stores (-29.9 percent).
For the first eight months, retail sales value fell by 6 percent over the same period in 2018, with total sales volume sliding 6.9 percent.
Retail sales showed a further sharp deterioration in August and were even worse than that recorded in September 1998 during the Asian Financial Crisis, according to a government spokesman.
"Apart from the weak consumer sentiment amid subdued economic conditions, the plunge in August mainly reflected the severe disruptions to inbound tourism and consumption-related activities caused by the local social incidents," the spokesman said, expecting that retail sales will likely remain in the doldrums in the near term as the worsened economic outlook and protests involving violence continue to weigh on consumer sentiment and inbound tourism.
Annie Yau Tse, chairwoman of Hong Kong Retail Management Association, also pointed out that the recovery of the local retail sector depends on whether the social movement will be resolved. The association maintained its expectation of a double-digit decline in retail sales for the full year.
She also predicted the figure would be even worse in October than the previous two months.
Retailers closed 30-80 percent of their stores on China's National Day, she said, and call on support from property operators and landlords to further reduce shop rents.
August tourist arrivals to the SAR tumbled 39.1 percent to 3.59 million, according to the Hong Kong Tourism Board, the biggest decline since May 2003 when the SARS outbreak hit. The number of mainland visitors fell 42.3 percent in August, accounting for 77.5 percent of the total.
As the protests drag on and tourists and shoppers stay at home, retailers are having staff take unpaid leave, with some reportedly planning layoffs.
The unrest in Hong Kong is dragging down the luxury industry globally and brands are re-examining their presence in the city, said analysts.
RBC Capital Markets analyst Rogerio Fujimori estimated that most brands would suffer a sales drop in Hong Kong of between 30 percent and 60 percent during the third quarter.
The city's days as a luxury hub are numbered, said Jefferies' analyst Flavio Cereda, and brands are likely to rethink their presence here.
Prada SpA is leading the exodus and plans to close its largest Hong Kong location in Causeway Bay after its lease expires next year. The shop's landlord on Russell Street is offering to slash the rent by 44 percent.
The city's economy likely entered a technical recession in the third quarter, Financial Secretary Paul Chan Mo-po said in September. Chan said earlier this week that the government would introduce more stimulus if needed, in addition to higher spending on relief measures.
Some smaller store owners have closed and one in 10 stores now stand empty in the usually bustling Causeway Bay shopping district, according to data from real estate agency Midland IC&I (0459).