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Chow Tai Fook takes on landlords

Hong Kong jeweller Chow Tai Fook is flexing its muscle in a softening retail rental market, seeking rent cuts of up to 20 per cent.

The listed company says some 30 leases across the territory will come up for renewal later this year and the company will be seeking reductions in the wake of a challenging retail market which has seen sales plunge in some luxury categories.

In an interview published on Bloomberg online, MD Kent Wong said the company has already been granted reductions of between 10 per cent and 20 per cent in renewal negotiations this year, but he did not reveal the number of leases involved.

He told Bloomberg that circumstances in 2015 are “very special”.

“We are demand driven; we expect we can have a 20 per cent rental reduction.”

Chow Tai Fook has reported a fall in same-store sales in Hong Kong and Macau of 26 per cent in the first quarter of this year – the fifth consecutive quarterly fall.

Wong said his company may close some stores this year – singling out its Peak outlet as an example.

The jeweller has 90 stores in Hong Kong, appealing largely to Mainland Chinese tourists. But visitor numbers from China have been falling, and those still coming are less affluent than the usual visitors of past years. Those with higher disposable incomes have started travelling further afield, many spooked by the Occupy Central protests of the second half of last year.

The mainland government’s clampdown on gift giving has also affected sales of higher priced luxury goods in Hong Kong.

Despite a decrease in total retail sales of 2.3 per cent in Hong Kong during the first three months of 2015, Wong expects a recovery later in the year.

“The market in general needs six months to one year to restructure the product mix catering to the changing taste of customers,” he told Bloomberg.

“We remain optimistic about Hong Kong in the mid- to long-term.”

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