Retail sales in record plunge

Hong Kong retail sales plunged by 44 percent to HK$22.7 billion in February - the steepest-ever drop - as tourist numbers slumped and citizens avoided crowded places amid restrictions brought on by the Covid-19 virus.

Retail sales value fell for a 13th straight month, data from the Census and Statistics Department also showed.

The plunge was worse than some feared. Median estimates of economists assembled by Bloomberg were for a 40.3-percent decline.

And the retail sales volume plummeted 46.7 percent from the same month last year.

The retail slump in February mainly reflected the heavy blow to tourism and consumption-related activities dealt by Covid-19, a government spokesman noted, though distortions caused by the timing of the Lunar New Year also contributed.

"The business environment of the retail trade will remain extremely austere in the near term as the Covid-19 pandemic has brought inbound tourism to a standstill and severely dented local consumption demand," the spokesman added.

In the first two months of this year retail sales fell 31.8 percent in value and 33.9 percent in volume.

By sectors, jewelry, watches and clocks plus valuable gifts were hit the hardest, with a sales dive of 58.6 percent.

Local jewelry retail chain Tse Sui Luen Jewellery warned yesterday it expected to record a net loss of no less than HK$80 million for the year ending March 31, dragged by sluggish retail sales since July last year amid social unrest and then the virus outbreak. The chain also said its turnover deteriorated further in February with the weakest overall sales in what should have been the traditional peak season in the retail industry. And it projects February turnover to plunge by 88 percent year-on-year. The company is also in negotiations with landlords for more rent cuts and is streamlining business operations and closing stores to weather the testing times.

Apparel sales also plunged around 50 percent during the first two months, while sales of medicines, cosmetics, footwear and clothing accessories as well as commodities in department stores all fell by more than 40 percent.

But sales of commodities in supermarkets increased by 11.1 percent and energy sales rose 6.5 percent as more people stayed at home to avoid the coronavirus.

Kelvin Lau, the senior economist for Greater China at Standard Chartered Bank Hong Kong, said the retail industry will continue to struggle in the next few months with SAR authorities adopting more severe measures in fighting the virus, including a ban on gatherings of more than four people in any public place.

In addition, asset qualities have deteriorated and consumer sentiment weakened with the increasing unemployment rate, which will continue to take a toll on the retail market.

Annie Tse Yau On-yee, chairwoman of the Hong Kong Retail Management Association, expects figures for March and April to remain in a trough, with sales values similar to February.

She does not see the situation recovering before June.

She also revealed that around 60 percent of 2,000 members of the association are considering temporarily closing stores.

On that, Tse called for landlords to further cut rents and for the government to launch more stimulus measures for retailers.