China Stock Turmoil 2015

Hong Kong conglomerate Wharf's shares fall to three-year low after sales underperformed at major malls

PUBLISHED : Tuesday, 18 August, 2015, 2:44pm
UPDATED : Tuesday, 18 August, 2015, 11:57pm

Shares of Wharf (Holdings) on Tuesday fell to their lowest in three years after retail sales at two of its major shopping centres, Harbour City and Times Square, lagged behind the overall industry in the first half.

But the company said no tenants had asked for a rent cut.

Stephen Ng Tin-hoi, the chairman and managing director of Wharf, said retail sales at Harbour City in Tsim Sha Tsui, the city's largest shopping mall, dropped 7 per cent year on year in the first six months, while Times Square in Causeway Bay lost 9 per cent.

"Our sales lagged Hong Kong's retail sales. We own a leasing portfolio with more retailers selling luxury items," vice-chairman Doreen Lee Yuk-fong said.

The city's retail sales declined 1.6 per cent in the first six months to HK$24.5 billion, according to data released by the Census and Statistics Department.

Hit by fewer tourists from China and Beijing's anti-corruption campaign that has dented luxury spending, sales of jewellery, watches and valuable gifts suffered the most with a 15.9 per cent drop to HK$44.19 billion, the government figures show.

In spite of the slow business at the two malls, Wharf, which has interests in industries ranging from real estate and telecommunications to air cargo terminals, reported an underlying interim profit increase of 4.54 per cent to HK$5.25 billion.

Rental income accounted for 80 per cent of core profit.

But the rise in core earnings failed to lift Wharf's shares. The stock on Tuesday dropped 2.86 per cent to HK$44.15, the weakest close since August 2012.

"It should be the first time that the two shopping malls, particularly Harbour City, underperformed the overall retail industry. The weakening share price reflects a sluggish market outlook," said Bocom International analyst Alfred Lau.

Lau also said spending by Chinese visitors accounted for 60 per cent of the sales at Harbour City, which is dominated by luxury brands.

Wharf will pay a dividend of 55 HK cents a share, unchanged from the same period last year.