No chance of recovery for Hong Kong’s stricken retail sector this year, says operator of Sogo department stores
- The ‘deeply pessimistic’ view came as Lifestyle International reported a net loss of HK$227 million for the first half, versus profit of HK$1.29 billion a year ago
- The pandemic will continue to weigh on consumer sentiment and inbound tourism, says executive director of Lifestyle, which runs the Japanese-style stores in Causeway Bay and Tsim Sha Tsui
Hong Kong’s battered retail sector has no hope of recovering in the rest of 2020, according to Lifestyle International Holdings, the operator of the city’s biggest Japanese-style department store chain.
“We maintain a deeply pessimistic outlook for Hong Kong’s beleaguered retail sector in the second half of the year,” said Lau.
“With Hong Kong currently experiencing the third wave of the pandemic, we can see no signs of improvement in the near term.”
The bearish view came as the company reported a net loss of HK$226.9 million (US$29.28 million) for the six months to June 30, versus a huge profit of HK$1.29 billion a year earlier.
“The lack of visibility about how the pandemic will play out also makes it impossible for us to see when or what kind of recovery can be expected in the intermediate term,” Lau said in the results announcement on Tuesday.
Retail spending plunged as social-distancing measures severely dampened consumption-related activities and austere labour market conditions heavily weighed on consumer sentiment. Global lockdowns brought inbound tourism to a standstill, said Lifestyle.
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The Sogo department stores were once the favourite shopping destinations of mainland Chinese tourists coming to the city.
Visitor arrivals to Hong Kong plummeted 89.9 per cent to 3.5 million on aggregate in the first half of 2020, with trips from mainland China reporting a 90.3 per cent decline.
Retail sales in the city dropped by a third year-on-year, compared with a decline of 2.6 per cent in the same period of 2019.
Accountancy firm PwC estimates Hong Kong retail sales will fall by 19.7 per cent to about HK$346 billion in 2020.
At the end of last month, the Hong Kong Retail Management Association appealed to landlords for generous rent-relief measures to rescue stricken retailers, warning that more than 60,000 shops are facing closure while over 260,000 workers may lose their jobs.
In view of the difficult environment, Lifestyle said it would continue to invest in digital enhancement and logistics support to improve sales.
Staff costs, excluding directors’ compensation, fell 10 per cent to HK$102.8 million, compared with the first half of 2019.
Loss per share was 15.1 HK cents, against earnings per share of 85.6 HK cents a year ago. Directors did not declare any interim dividend.
The shares rose 2.57 per cent higher to HK$6.39 at the close of trading on Tuesday. That compares with a 52-week high of HK$10.74.
