Hong Kong retail sales plunged 13.6 per cent year on year in the first two months of 2016 – the biggest slump since 1999 – and the worst may be yet to come. Retailers are likely to see a double-digit sales decline in the first quarter and end this year with revenue contracting at a rate in the high single digits, according to the Hong Kong Retail Management Association. Sales have been declining every month for the past year, and the latest slump is attributed to dwindling visitor numbers, which dropped 13 per cent during the same period. Visitors from the mainland fell 18 per cent despite 7 per cent growth in overseas visitors, according to the Hong Kong Tourism Board. Large-scale lay-offs and even “a tide of shop closures” would not be surprising if the situation persists over the next few months, industry insiders warned. Hong Kong retail showing worst decline since the Asian Financial Crisis “This year will definitely be worse,” said Thomson Cheng Wai-hung, chairman of the association. He admitted the extent of the current downturn had far exceeded industry expectations, with sales declining 3.7 per cent for the whole of last year. “Apart from the severe drag from the protracted slowdown in inbound tourism, asset market consolidation might also have weighed on local consumption sentiment,” a government spokesman said, adding that the near-term outlook for retail sales would still be constrained. In 20 retail categories surveyed, only one – supermarket goods – recorded growth, expanding 0.2 per cent in the first two months, while 13 saw double-digit declines. The value of total retail sales in February slid 20.6 per cent to HK$37 billion compared with the same period last year, a further deterioration from January when it contracted by 6.6 per cent. Retailer therapy: how declining sales for luxury brands have created an opportunity for mid-range retailers in Hong Kong While February sales are usually better because of Lunar New Year, Cheng noted a surprise decline in demand for festival-related goods, including festive foods and alcohol. He described it as a worrying trend and an indication that local consumption had turned weak amid a gloomy economic outlook. “We were all shocked … People would not spend the money even during Lunar New Year,” he said. Jewellery, watches and other valuable gifts, usually popular with mainland visitors, led the latest retail slump, recording a 24.2 per cent sales plunge in the first two months. This was followed by sales of clothing and department store goods, which shrank 11.4 per cent and 12.3 per cent respectively. Cheng said Hong Kong’s retail market was “beset by enemies from within and without” as both locals and tourists turned to overseas alternatives for shopping. “We have no hope for March,” Cheng said, as the Easter holidays usually see Hongkongers fly away from the city, meaning lower domestic consumption.