Business

Hong Kong's luxury retailers lose sales as protests mar 'Golden Week' holiday

Reuters

Pro-democracy protests in Hong Kong have disrupted business and hit share prices of luxury goods companies, ruining what is normally one of the busiest shopping weeks of the year.

The protests in Hong Kong, the biggest challenge to Beijing’s leaders since the former British colony reverted to Chinese rule in 1997, coincide with China’s “Golden Week” holiday, which runs until Tuesday. It is traditionally as important to luxury retailers in the region as Christmas or New Year’s are in Western markets.

Analysts believe retail sales have taken a substantial hit in one of the world’s key markets for luxury goods. Hong Kong accounts for about $9.7 billion of global luxury sales, or 4 percent of the worldwide total, according to estimates from Bernstein Research.

After police used tear gas, batons and pepper spray against protesters last weekend, travel agents said the number of Chinese tours to Hong Kong was down around 30 percent. The European financial services company Kepler Cheuvreux estimates 75 percent of local sales are driven by tourism from the mainland.

“As the Golden Week may be responsible for half the month’s total, and market anecdotes suggest that sales of the shops have declined by about 70 percent, the affected shops might have lost HK$2.2 billion ($285 million),” said Raymond Yeung, a senior economist at ANZ Bank in Hong Kong.

Estimates like that have weighed on shares of luxury goods makers such as Prada SpA, whose Hong Kong-listed shares fell as much as 4.6 percent on Friday to their lowest in more than two years. Kering, the owner of Gucci, is down nearly 6 percent from a week ago. Gucci relies on the city for a tenth of global sales.

Over the past week, Burberry has lost around 4 percent of its value. Richemont — whose biggest market is Hong Kong — has declined by 3.7 percent, while Prada has retreated 2.7 percent.

Shares in luxury goods companies were already under pressure, having been hit by Beijing’s anti-corruption campaign, which has reined in conspicuous consumption among wealthy Chinese.

Kepler Cheuvreux reckons on a potential 5 percent reduction in Richemont’s earnings per share and 4 percent for Swatch but think price falls have already factored this in.

Anecdotal evidence from other cities popular with Chinese visitors, such as Singapore, Tokyo and Sydney, suggests tourists from China have been spending hard.

At Singapore’s glitzy Marina Bay Sands mall, a shop assistant at Burberry said the majority of customers this past week had been mainland Chinese.

“We’ve been busy serving PRC [People’s Republic of China] customers all morning,” said a sales assistant at Prada. “We expect it to increase over the weekend and maybe as the Hong Kong protests continue.”

It was a similar story at Italian fashion house Fendi, where an assistant said: “We saw a notable increase in Chinese shoppers, about 30 percent more. Golden Week is big for all retailers, not just us.”

In Tokyo, department store chain Isetan reported nearly three times more Chinese visitors than a year ago, helped by a change this month in Japan’s duty-free policy. “There are eight seats for the duty-free service counter instead of three last year to accommodate more customers,” said a spokesman. “From what we have heard from our shop attendants, there were about 20 people constantly lined up, and about 80 percent were Chinese customers.”

Australia, currently considering easing visa rules to lure wealthy Chinese, is an increasingly popular destination for China’s growing class of well-heeled visitors.

In Sydney, staffers at Gucci, Hermes and Miu Miu all reported a pick-up in Chinese visitors this past week.