Sogo operator worried over outlook as extradition bill protests, trade war weigh on first-half sales
- The company’s Causeway Bay store saw a 3.7 per cent drop in footfall to 78,600 people per day as protesters targeted the popular shopping district during the protests
- Net profit attributable to Lifestyle International Holdings’ core operations fell 2.7 per cent to HK$981.3 million
Lifestyle International Holdings, which operates Sogo department store, said the outlook for the rest of the year looks bleak after the Causeway Bay branch recorded a 4.8 per cent decline in sales in the first half, as protests reduced footfall by 3.7 per cent and mainland tourists spent less amid a slowing Chinese economy.
“In June, the large scale protests and marches had a huge impact on consumer sentiment and the retail sector,” said Thomas Lau Luen-Hung, chairman of the group, said at a press conference on Monday to announce the first-half results. “[The economy] started deteriorating in June, worsened in July, and I think it will further go downhill in August. This is the actual situation we’re in right now.”
Lau said that the ongoing US-China trade tensions and heightened economic uncertainties, combined with the city’s ongoing political and social unrest, would continue to weigh on the city’s economy and the retail sector in the second half of the year.
He hoped that the protests sparked by the now-abandoned extradition bill, which are entering their 10th week, could be resolved quickly so that the city returns to normalcy once again.
Weakening yuan, possible China slowdown worry Sogo store operator as profit plunges by half
Causeway Bay and Tsim Sha Tsui, where the Sogo stores are located, were among the districts targeted by protesters.
“A few of the marches took place near our department store in Causeway Bay, and this has more or less impacted our traffic footfall,” said Terry Poon Fuk-chuen, chief financial officer of Lifestyle International Holdings, adding that average daily footfall fell 3.7 per cent to 78,600 people per day in the six months to June.
The Sogo store in Tsim Sha Tsui, however, saw a 9.5 per cent increase in sales during the first half, driven by a 14.3 per cent increase in sales of cosmetics and skin care products.
The net profit attributable to owners of the company rose by 44.8 per cent to HK$1.3 billion (US$165.7 million) in the first six months, compared with HK$888.1 million in the same period last year. This came on the back of a massive jump in investment income of HK$427 million, compared with an investment loss of HK$56.2 million last year.
However, net profit attributable to the group’s core operations fell 2.7 per cent to HK$981.3 million, as a result of drop in sales revenue amid a weaker retail environment.
Lifestyle, which reports two sets of numbers for sales, posted a 2.4 per cent drop in gross sales proceeds to HK$5.66 billion, and a 1.8 per cent decline in turnover at its department store operations to HK$2.10 billion.
The company had around HK$5.797 billion in cash on hand, while its financial investments amounted to nearly HK$4 billion as of June.
