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US clothing retailer Gap to close some Hong Kong stores after sales sink due to coronavirus-induced slowdown

South China Morning Post logo South China Morning Post 2/7/2020 Sandy Li sandy.li@scmp.com
a person standing in front of a window: The Gap store in Hysan Place, Causeway Bay, which will close in the next few weeks. Photo: Martin Chan © SCMP The Gap store in Hysan Place, Causeway Bay, which will close in the next few weeks. Photo: Martin Chan

US clothing and accessories retailer Gap Inc has confirmed it will close five out of its eight stores in Hong Kong, becoming the latest international brand in Hong Kong to succumb to the coronavirus-induced economic slowdown.

The retailer will close its stores at Albion Plaza in Tsim Sha Tsui, Hysan Place in Causeway Bay, Festival Walk in Kowloon Tong, and two outlets at shopping mall K11 in Tsim Sha Tsui, in July and August, Gap said in a written reply to the Post on Friday.

"After evaluation against our strategic priorities in Greater China, we have made the difficult decision to close our stores," Gap said. "We see the need and greater value in prioritising and focusing our resources at this time. This is a pure business decision that has nothing to do with anything else."

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The company has not given up on Hong Kong completely as it plans to keep its stores in Queen's Road in Central, V city in Tuen Mun and Citygate mall in Tung Chung open.

a group of people standing in front of a mirror posing for the camera: People go past an advertisement outside the Gap store in Hysan Place, Causeway Bay. Photo: Martin Chan © Provided by South China Morning Post People go past an advertisement outside the Gap store in Hysan Place, Causeway Bay. Photo: Martin Chan

"Hong Kong's retail and tourism industry is unlikely to fully recover this year," said Thomas Lam, executive director at Knight Frank. "Brands with many shops in expensive locations will consider closing some of their stores especially when sales have nosedived."

He said that this was most likely a strategic move as most international brands will gradually shift to online sales.

Victoria's Secret closes flagship store in Causeway Bay

The shrinking of Gap's operations does not bode well for the city's landlords, as retailers big and small, fold due to an economic recession brought about by the social unrest that started in June last year and compounded by the Covid-19 pandemic.

Last week, American lingerie maker Victoria's Secret closed its flagship store in Causeway Bay. Earlier in June, Greek jeweller Folli Follie shut all of its shops.

Last year, Italian luxury brand Prada closed its flagship store on Russell Street, one of the most exclusive shopping strips in the world where other high-end tenants, including watchmaker Rado, have shut shop.

Hong Kong retail sales have fallen for 16 straight months up to May as visits by mainland tourists evaporated. Consumer spending in May meanwhile slumped 32.8 per cent year on year to HK$26.8 billion (US$3.5 billion), according to provisional government figures.

In early June, Gap reported a quarterly loss of nearly US$1 billion as the company was forced to close stores temporarily due to the coronavirus outbreak.

San Francisco-based Gap, which operates nearly 2,800 stores in North America, said it would prioritise closing some Gap stores and seek rent concessions for well-positioned stores that cannot support the current rent structures.

"As a normal course of business and similar to other retailers, we periodically review our real estate portfolio, to open or close stores accordingly to ensure we have the right stores in the right places to best serve our customers," said Gap told the Post.

"The retail market evolves fast, thus our evaluation is an ongoing and dynamic process." it said.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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