Early end to Sogo lease hits operator's shares
Department store operator Lifestyle International Holdings fell as much as 8 per cent yesterday after the company said its Sogo store in Tsim Sha Tsui would close down earlier than expected.
The share price of Lifestyle International dropped 5.7 per cent to close at HK$16.82 yesterday, although the Hong Kong-based retailer said the store closure would have only a minor impact on the group's business. The benchmark Hang Seng Index rose 0.1 per cent yesterday.
New World Development, the landlord of the Sogo Tsim Sha Tsui store, said on Monday that it would terminate the lease at the three-storey underground department store located on 12 Salisbury Road as it planned to redevelop the property.
Sogo is required to move out of the premises by February 2014. The two parties signed a leasing agreement in 2005 for Sogo to rent the place for 15 years.
A spokeswoman for Lifestyle International said the company was actively looking for other retail locations but had yet to find a suitable site.
For the financial year to December, the turnover and net profit generated from the Sogo Tsim Sha Tsui department store accounts for 8.8 per cent and 4.8 per cent of the company's total turnover and net profit, respectively.
The spokeswoman said the proportion of the store's profit in total earnings was expected to decline this year and the next, because the contribution from its mainland stores would keep increasing.
Lifestyle International runs Sogo department stores in Causeway Bay and Tsim Sha Tsui, Jiuguang department stores in Shanghai, Suzhou and Dalian, as well as the Lifestyle Plaza in Tianjin.
Deutsche Bank analysts wrote in a research note that the company would see limited impact from its 2014 store closure, considering the relatively small proportion that store took up in the entire business. The bank maintains a 'buy' rating for Lifestyle International with a target price of HK$22.70.
The Sogo Tsim Sha Tsui store has a gross floor area of 115,000 square feet. The total rent last year was HK$61.6 million.
