By Frances Sit and Adam Xu at The Standard
Retail rents in prime areas are under renewed pressure as high-end fashion brands feeling the pain of lackluster consumer sentiment and falling numbers of mainland shoppers seek rent cuts.
Business is getting tougher for Hong Kong’s retailers with the value of total retail sales dipping 1.6 percent in the first half of 2015 from a year back, according to the Census and Statistics Department’s latest data.
Valuable gifts, including jewelry, watches and luxury goods, were hardest hit, with sales falling for 10 consecutive months. Sales value slumped 10.4 percent in June compared with a year earlier, despite efforts by several luxury brands – including Italian fashion house Prada – to boost sales by cutting prices.
Squeezed by slimmer pickings in Hong Kong and the mainland market, top global luxury brands are looking to renegotiate store rents to cut costs.
The latest to plead for landlords’ mercy was French luxury goods conglomerate LVMH. Revenue from its signature brand Louis Vuitton slumped 10 percent year- on-year in Hong Kong, Macau and China for the first half while Europe and the United States saw stronger sales of fashion and leather goods.
It is also planning to close a directly operated shop of its biggest watch brand, Tag Heuer, in Causeway Bay. “I’m not sure if the shop will be closed this year or next but for sure I want to close it because of high rental costs and a drop in traffic,” chief financial officer Jean-Jacques Guiony told Reuters on M
British high-end fashion house Burberry, which has 16 shops in the SAR, said it may trim its local store network and negotiate for lower rents after the Hong Kong market, which accounts for about one-tenth of the brand’s total sales, saw a double-digit percentage fall in sales over