Hong Kong luxury retailer Emperor Watch and Jewellery reports a surprise turnaround in second-half profits following steep rental cuts and the return of mainland Chinese tourists to the territory.
Controlled by the family of Hong Kong entertainment mogul Albert Yeung Sau-shing, Emperor retails European watches and jewellery with outlets in Hong Kong, Mainland China and Singapore.
It had a modest net profit of HK$3.8 million (US$490,000) in the second half of last year, narrowing its full-year loss to HK$64.8 million from HK$120.1 million a year ago.
Group revenue fell 17.8 per cent to HK$3.6 billion last year, dragged lower by a slowing Chinese economy and austerity measures. Its sales of watches and jewellery were down 19 and 12 per cent respectively.
“There’s been a gradual pick-up in watch sales recently,” says Emperor chairperson Cindy Yeung Lork-sze, attributing this to a stronger Japanese yen, and terrorism in Europe prompting more mainland visitors to visit Hong Kong.
But Yeung warns of uncertainty ahead for the luxury retail sector as a weakening Chinese yuan and Hong Kong’s peg to the stronger US dollar would make it more expensive for mainlanders to shop in the territory.
Hong Kong retailers last year had their biggest decline in annual sales in nearly two decades, with an 8 per cent slump. January figures improved slightly, although sales of luxury goods such as watches and jewellery were down 4 per cent.
Emperor closed three shops last year, giving it 97 outlets as at the end of last month. With about two-thirds of them on the mainland, it is now eyeing markets like Malaysia and Thailand. “We have slowed our plans in these places because of political and currency factors. Now we are doing some market research,” says Yeung.
In Hong Kong, most of the group’s 22 stores are in tourist districts such as Causeway Bay and Tsim Sha Tsui. It will open two or three branches this year in areas near the Chinese border, such as Sheung Shui and Tuen Mun, to take advantage of lower rents and growing traffic there.
Emperor will also renew rental contracts for about a third of its shops in Hong Kong. “We are expecting a rental decline of 30 to 40 per cent for our shops this year,” says Yeung. Rental expenditure accounted for 13 per cent of revenues, or HK$470 million, last year – down about 30 per cent during the retail slump.
