Rising mainland tourist receipts have encouraged merchants to spend big on new stores and shareholder dividends Major Hong Kong retailers are on a charge, opening new stores, hiring staff and giving pay rises as they move aggressively to cash in on the rebounding local economy. Having recorded impressive results last financial year despite Sars, retailers have regained their old confidence and are spending big as domestic consumption improves and mainland tourist numbers climb. Leading the charge are Dickson Concepts (International), Sa Sa International, Bossini International Holdings and Hang Fung Gold Technology, which have committed a combined total of about $200 million for the opening of new stores either this year or next. Luxury retailer Dickson Concepts, which distributes the Brooks Brothers, Ralph Lauren and Bulgari brands, last week announced the opening of 32 stores throughout Asia. Five of them will be in Hong Kong, including a $50 million, 20,000-square-foot Seibu department store at Langham Place in Mongkok. Sa Sa has set aside $50 million for expansion in Hong Kong, while Bossini plans to add five stores costing $30 million. Jewellery maker and retailer Hang Fung Gold will open two stores at an undisclosed price. The expansion spree is expected to create hundreds of jobs. Hang Fung Gold in particular is a major beneficiary of the influx of mainland tourists. With an extra 43 million mainland tourists eligible to visit Hong Kong from July 1, the company expects its sales to jump 30 per cent. To cater for this increase, Hang Fung Gold said it would need 100 more staff this year. With new life being breathed into the retail sector, analysts have revised sharply upwards their earnings forecasts for major retail stocks for this year and next. In a written report, CLSA analyst Amar Gill said results for the consumer/retail sector had exceeded expectations. 'We expect revenue growth for the retail sector to be strong to at least 2006,' he said, noting the mainland solo travel scheme had been extended to nine more provinces from this month. Riding on the back of the hefty increase in tourist spending, Core Pacific-Yamaichi analyst Bonnie Lai expected Sa Sa, which gets 40 per cent of its sales from tourists, to register 32 per cent growth in net profit to $200.6 million for the financial year to March 2005, and $238 million in 2006. 'We have aggressively revised up our net profit forecast by 19 per cent this financial year and 11 per cent for next year,' she said. Sa Sa, which sold three of every 10 bottles of perfume in Hong Kong, last week announced earnings had shot up 121.4 per cent to $151.07 million, five days after Dickson Concepts reported a profit increase of 92.21 per cent to $120.27 million for the year to March. The strong performances of the two companies have also been good for shareholders, with the payment of generous dividends. Dickson Concepts has recommended the final dividend be lifted by 193 per cent to 22 cents and a bonus share for every 10 existing shares be offered to shareholders. Sa Sa will distribute all its profit - $151 million - as dividends. Casual wear retailer Giordano International, which operates 1,300 outlets in Asia, said the market sentiment was definitely better these days. 'But the retail industry is not back in full swing yet,' said Alison Law, assistant to Giordano chairman Peter Lau Kwok-kuen. She said local consumers, unlike tourists, remained cautious in spending as they were used to receiving discounts and sweeteners. Instead of opening new stores, Giordano preferred to relocate their shops to better areas to enhance competitiveness. 'In Hong Kong, we have good coverage with 82 stores,' Ms Law said. Hong Kong Retail Management Association chairman Yu Pang-chun said most sectors in the industry had returned to the business level of 2002, except for supermarkets, which were still under deflationary pressure. The association expects this year's retail sales in value and volume to return to positive growth, with low single-digit growth for the first time since 1997. 'We have seen some light at the end of the tunnel but whether it can be sustained will depend on the economic recovery,' Mr Yu said. However, he conceded that retailers targeting the domestic market were still feeling the pinch from weak spending. Hang Seng Bank chief economist Vincent Kwan Wing-shing expected retail sales to slow in the second half of this year because of the high comparison base a year ago when sales recorded a sharp rebound after the Sars outbreak. Hong Kong's retail sales in April had the fastest year-on-year growth of the past four years, recording a 19.9 per cent jump to $15.46 billion.