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Sa Sa to exit Singapore market as Hong Kong retailers face losses amid protests, dwindling mainland Chinese tourists numbers

South China Morning Post logo South China Morning Post 3/12/2019 Lam Ka-sing
a group of people in a store: View of shops on Russell Street in Causeway Bay. 14NOV18 SCMP / Dickson Lee © SCMP View of shops on Russell Street in Causeway Bay. 14NOV18 SCMP / Dickson Lee
  • Exit from Singapore will allow Hong Kong cosmetics chain to put resources in core markets to help stem six years of losses
  • Sa Sa and peers face difficult operating environment as fewer tourists from mainland China deny city’s retailers of crucial ‘lifeblood’

Sa Sa International, Hong Kong's biggest cosmetics retailer, will close all its 22 stores in Singapore and cut 170 jobs to save costs as it struggles to stem six years of losses, months of anti-government protests, and the US-China trade war.

Attempts to boost sales in recent years by restructuring the local management team and enhancing store display and product mix have been "far from satisfactory,” chairman and chief executive Simon Kwok Siu-ming said in a filing to the stock exchange on Monday. The terminated employees will be compensated according to local employment laws, he added.

Sales in Singapore fell 4.6 per cent to HK$99.4 million (US$12.7 million) in the six months to September 30, the company said, representing 2.8 per cent of the group turnover. At the group level, Sa Sa incurred a HK$36.53 million loss in the period.

"The performance in Singapore has been less than satisfactory for many years, and has recorded losses for six consecutive years,” Kwok said in the filing. "It has decided to close all retail stores in Singapore to concentrate its resources on the markets in Hong Kong and Macau, mainland China and Malaysia, as well as its e-commerce business.”

The 22 stores will be closed as early as possible but the exact timing will depend on negotiations with individual landlords,” he said.

The decision to withdraw from the Southeast Asian city suggests the cosmetics chain is conserving its resources for tougher times at home as months of anti-government protests triggered a slump in tourist arrivals from mainland China, a lifeblood of local retailing industry. Hong Kong’s retail sales plummeted 24.3 per cent in October, the biggest monthly decline on record, the government said on Monday.

Visitor arrivals plunged by 43.7 per cent on year in October to 3.31 million, the Hong Kong Tourism Board said. Provisional figures in the first half of November were down more than 50 per cent, according to the Commerce and Economic Development Bureau.

"The double whammy of escalating social unrest across the city and the protracted US-China trade war has resulted in falling retail sales,” said David Ji, head of research and consultancy of Greater China at Knight Frank. "There have been waves of shutdowns and lay-offs at retailers. The situation appears to be as bad as during the Asian financial crisis.”

The operating environment in its core market in Hong Kong has become extremely difficult due to a drastic decline in mainland tourist arrivals, Kwok said. The primary goal is to focus resources on its core markets and areas with growth potentials to restore profitability, he added.

Sa Sa is not alone as Hong Kong’s economy fell into a technical recession. Industry peers from luxury store owner Dickson Concepts to jeweller Chow Tai Fook and snack-chain operator Best Mart 360 have taken a beating as protests kept visitors away from shopping malls.

Lin Tsz-fung, chairman and founder of Best Mart 360, wants to reduce his reliance on Hong Kong for growth in favour of opening more stores in mainland China after some three-quarters of its 102 stores in the city were vandalised throughout the social unrest.

Some of the stores have been repeatedly thrashed even after restoration, because of the group’s alleged links to mainland political bodies. Lin has not dared to open a store planned for October, running down the lease at a loss, he said.

Dickson Concepts, which runs the Harvey Nichols department stores, said sales have been affected while margins squeezed by attempts to move on unsold stocks while fixed costs remain elevated. It does not expect a return of Asian and mainland Chinese tourists in the foreseeable future.

"The group is extremely pessimistic about the retail climate in Hong Kong,” founder and group executive chairman Dickson Poon said in a filing to the stock exchange, saying the second fiscal half could be significantly worse. "With Hong Kong in recession, the future looks bleak.”

Falling sales at Chow Tai Fook has also prompted the world’s largest listed jeweller to take some drastic actions. It will close up to 16 outlets in Hong Kong and is seeking 20 to 50 per cent reduction in rents from landlords when renewing leases from October to March next year.

The group reported a 48 per cent plunge in same-store sales in Hong Kong and Macau in the October 1 to November 21 period. Luk Fook, another jeweller, is also planning to close down outlets in areas worst hit by violent protests.

"Retailers and shopping malls in key shopping districts, such as those in Causeway Bay, Tsim Sha Tsui and Mong Kok, have been badly impacted, as the protests centre on these districts,” Knight Frank’s Ji said. "Many of them had to limit their operating hours or even close temporarily. Consumer sentiment will remain weak.”

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

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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