Swedish home furnishing retailer Ikea said it would move into shopping centre MegaBox in Kowloon Bay next year as British rival B&Q moves out.
Sources said B&Q would not only retreat from the MegaBox, but also the Hong Kong market. Calls to the company were not returned.
Kingfisher, Europe's largest home-improvement retailer which owns B&Q, had said the write-down for its mainland outlets had pulled down last year's net profit.
It planned to close 22 stores on the mainland and renovate the remaining 41 as part of a 'comprehensive repositioning'.
In Hong Kong, it has also struggled to attract consumers since opening the first and only store two years ago.
But Ikea, which focuses more on home furnishing rather than on do-it-yourself products, has deeper roots in Hong Kong. Started in 1975, Ikea's Hong Kong business, now controlled by Jardine Matheson Holdings through Dairy Farm International Holdings, runs four stores.
The new store in MegaBox, which will be its largest in the city, would replace its current outlet in the nearby Telford Plaza. It will officially open for business in mid-2010.