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Wednesday, November 23, 2016, 22:37

Retailers pile pressure on landlords

By Luo Weiteng
Retailers pile pressure on landlords
With its sales continuing to decline, Hong Kong-based cosmetics retailer Sa Sa International Holdings has vowed to beef up its digital drive to attract Chinese mainland customers. (Parker Zheng / China Daily)

With the protracted retail winter showing no signs of going away, and the booming e-commerce continuing to steal the thunder from brick-and-mortal stores, skincare and cosmetics retailer Sa Sa International Holdings is looking at rent discounts of up to 50 percent for its more than 100 outlets in the city.

The Hong Kong-listed retailer posted a 37.3-percent slump in its first-half net profit to HK$96 million, partly due to the months-long drop in Chinese mainland tourist arrivals. Declining mainland visitor numbers, in particular, sent the group’s revenues in the Hong Kong and Macao markets 3.6 percent lower to HK$2.9 billion, compared with the 4-percent drop in total turnover to HK$3.6 during the period.

Sa Sa’s share price jumped more than 4 percent to finish at HK$3.46 on Wednesday, but Chairman Simon Kwok Siu-ming reiterated that he couldn’t expect too much of the company’s performance and see no chance of sales going up by year-end after Hong Kong’s retail sales had tumbled for 19 months in a row.

“I would be more than happy if our business could remain stable,” Kwok said on Wednesday.

But, one thing that could be anticipated is a great bargain for rents. With a cluster of hard-pressed international retailers having been forced to pull the plug on their operations in some of the city’s key business spots amid one of the sharpest global economic slumps seen in decades, Sa Sa is seeing a big chance of negotiating a considerable rent reduction from struggling commercial property developers.

The retailer expects rent discounts of up to 50 percent for street stores in prime tourist shopping districts and relatively lower rents for outlets in shopping malls, which account for 60 percent of Sa Sa’s total number of brick-and-mortal stores in Hong Kong.

Rent discounts have been commonplace as the battered retail industry continues to face bleak prospects.

Intimate wear chain Victoria’s Secret is reportedly taking over the 51,188-square-foot mega store of US clothing retail chain Forever 21 in the heart of Causeway Bay, paying only about half of the HK$7-million monthly rent paid by Forever 21.

Likewise, British high-fashion brand Burberry has extended its contract for a three-floor store in Tsim Sha Tsui at a 30-percent discount, with the monthly rent cut to HK$4.5 million. However, the extension will only be in force until February next year.

And, with high-end US fashion chain Abercrombie & Fitch becoming the latest international brand to close down its flagship store in the city’s prime Central business district, its successor moving into the mega store would not be willing to pay the record-high HK$7-million monthly rent.

Sa Sa said it’s determined to beef up its digital drive to attract mainland customers. Jumping on the e-commerce bandwagon would be a long-term strategy, especially when mainland tourist numbers and purchasing power keep coming down.
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