HONG KONG - Chow Tai Fook Jewellery Group Ltd, China's largest jewellery retailer by market value, expects to close 5-6 Hong Kong stores in the fiscal year ending in March, as tourists are put off visiting the city by a strong local currency.
Managing Director Kent Wong said on Friday the company would negotiate for lower rents when it renews leases and would see more store closures unless rents were cut in the city's key tourist areas including in Causeway Bay and Tsimshatsui. "Hong Kong remains challenging because of the strong Hong Kong dollar," he said on a telephone conference. "Same-store sales for the current quarter and on the coming Chinese new year (in Hong Kong) can be a decline as we see no sign of recovery yet." Chow Tai Fook said its overall retail sales fell 11 percent in value terms in the three months ended December, compared with a 10 percent drop a year earlier, due to a fall in the number of mainland tourists and weak local consumer spending.
Its retail sales in Hong Kong and Macau dropped 20 percent in the quarter, while in China they were down 6 percent.
Same-store sales fell 15 percent as a whole during the quarter, with Hong Kong and Macau down 23 percent and the mainland sliding 6 percent.
The data came days after Hong Kong posted a 7.8 percent fall in retail sales in November, its ninth consecutive month of decline. Sales of jewellery and watches plunged 20.6 percent after a 17 percent fall in October. Luxury retailers are feeling the heat from fewer mainland visitors. In August, Coach Inc closed its flagship store in Hong Kong and last month Italy's Prada SpA reported a 38 percent fall in August-October profit.
Hong Kong is bracing for greater economic challenges as the prospect of a cycle of interest rate rises drives fears of capital outflows that could pressure the Asian financial hub, while a strong Hong Kong dollar has made the city an expensive destination for China's cash-rich tourists.