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Hong Kong
By Mary Kavanagh
There are hopes of the Christmas holiday season redeeming an otherwise rather dismal year for both Hong Kong jewelry sales and overall retail sales. The hopes might not be high, but in the last quarter, there were signs of the retail sector stabilizing after a very long downward spiral. Overall retail sales in October fell for the twentieth consecutive month, yet the smaller decline of 2.9 percent in value and 2.7 percent in volume — the smallest in 2016 — offered a glimmer of hope. The .1 percent decline in jewelry, watches and clocks, and valuable gifts was the smallest for this category in many months. Thomson Cheng, chairman of the Hong Kong Retail Management Association (HKRMA) attributed the narrow decline in sales of jewelry to the heavy discounts by retailers — which helped counter the negative impact of a depreciating yuan against the Hong Kong dollar — and the better tourist numbers that month. Cheng predicted the overall decline in retail sales value in 2016 to be 7 percent to 8 percent. He also said he was optimistic that the festive season would boost retail sales.
“2016 has been a challenging year for Hong Kong,” Cheng said. “Despite strong headwinds, the Hong Kong economy has proven to be more resilient than expected. A 1.9 percent year-over-year growth was recorded in the gross domestic product (GDP) in the third quarter of this year, which is better than the previous two quarters. The economic growth forecast for the whole year has been adjusted to 1.5 percent, the mid-point of the 1 percent to 2 percent range forecast by the government in August,” he said. Many of HKRMA’s member companies said they anticipated a low single-digit drop in the sales value for November and December. The retail sector still faces a challenging road ahead. Consumer sentiment is low and visitors from Mainland China continue to choose other Asian and global destinations above the city. A case in point is the 44 percent increase in Mainland visitors to Singapore in the first eight months of 2016. By comparison, visitor arrivals from the Mainland to Hong Kong fell 8.7 percent for the first nine months this year, compared with a 3 percent fall in 2015, as the stronger U.S. dollar also made shopping the city more expensive. There was however an 18 percent rise in Mainland visitors to Hong Kong over the four-day Christmas holiday, but retailers reported sales were down as these shoppers were spending less on big-ticket items. Retail chain Chow Sang Sang reported sales were down 10 percent over Christmas compared to last year.
Chow Tai Fook (CTF), the world’s largest publicly traded jewelry chain, reported a 21.5 percent drop in its first-half earnings for the period ended September 30, 2016 — a significantly smaller decline than the 42 percent decrease for the same period in 2015. Revenue for the same period dropped 23.5 percent. Henry Cheng, CTF chairman, said, “While we hold a cautiously optimistic stance in the near term, we remain confident in the long-term prospects for the Greater China jewelry market. With our solid fundamentals, vast industry knowledge and renowned brand name, we are fully equipped to capitalize on business opportunities and emerge stronger out of the current market conditions.” CTF continued to consolidate its points of sale (POS) to streamline and restructure its operations and distribution channels, closing six POS in Hong Kong and Macau in the first half of 2017 and plans to close more in the second half. In Mainland China, it opened 107 POS and closed 94.
CTF hosted its fifth annual high-jewelry collection auction dinner in November for its VIP clientele. The 14 lots of Le Labyrinthe Artistique collection up for sale were inspired by the work of four famous abstract artists: Wassily Kandinsky, Frank Stella, Piet Mondrian and Robert Delaunay. “This is our first high jewelry collection inspired by the arts,” said Adrian Cheng, CTF executive director. “It’s a celebration of some of the most significant abstract artists in history.” All lots were highly contested with many selling significantly over the starting price, indicating that the appetite for one-of-a-kind unique high-end jewelry is not impacted by the slowdown in the economy. This is an ongoing pattern seen over the past year in the city. It was confirmed by Arnaud Bastien, Graff Diamonds president and CEO Asia, who said their business was not affected by the general economic downturn and their strategy to place their retail outlets in exclusive hotels was effective as their target group had the time to shop for jewels when on vacation.Article from the Rapaport Magazine - January 2017. To subscribe click here.
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