Chow Tai Fook Jewellery Group has revealed plans to shut about one in five of its Hong Kong stores, the majority of them in prime tourist areas.
The closures will take effect when leases come up for renewal throughout this year, starting from April according to an emailed statement cited by Bloomberg.
The move follows announcements by Prada and Louis Vuitton they will not renew their leases on stores in Russell Street and Times Square, respectively. Sasa International has previously said it would close up to 30 stores in Hong Kong.
The network retrenchments follow rapidly declining retail sales in Hong Kong since June last year, especially in the luxury sector, due to ongoing demonstrations and protests in the streets which have spooked foreign visitors, and declining visitor numbers from tier-1 cities in Mainland China. Jewellers have been hit by volatile gold prices as well, sparked by geopolitical tensions and the Sino-US trade war.
Chow Tai Fook has not specified exactly how many stores it will close, referring to “in the mid-teens” when asked.
The stores are primarily located in areas popular with tourists, including Tsim Sha Tsui, Mongkok and Causeway Bay.
Chow Tai Fook believes a trimmer store network will reduce overheads and improve margins after it experienced three consecutive quarters of declining same-store sales. In the three months to December 31, same-store sales fell 35 per cent in value in Hong Kong and Macau and by 47 per cent in volume.
However on the mainland, sales rose 17 per cent during the quarter, driven by the rapid expansion of the brand’s store network there; it added a net 279 stores. Same-store sales on the mainland rose by 2 per cent.
Commenting on the announcement, Veronica Wang, a partner at OC&C Strategy Consultants said the tourist-led retail structure in Hong Kong will continue to change in the future. “The recent disruptions have accelerated the process but never the root course of it. “
She said that given the growing mobility of Chinese consumers, based on factors like the ease of getting visas to visit other countries and more destination options, travellers now have a much broader choice of destinations to shop, including Japan, South Korea, France and Italy.
“Hong Kong will gradually lose its position as the shopping paradise and the demographics of Chinese travellers who go to Hong Kong will be different from before.
“Given this structural change, it is not surprising tourist-oriented retail stores will be facing challenges and network rationalisation will be a sensible step since the local demand might not be enough to support the current network.”