Sogo department store parent Lifestyle International has been impacted by falling spending by mainland Chinese visitors and the early stages of the extradition bill protests.
Direct sales at the group’s two stores in Causeway Bay and Tsim Sha Tsui were down 2.8 percent in the six months to June, while total gross sales, including those of concessions, fell by 2.4 percent.
Executive director Lau Kam Shim said China’s economic slowdown and global political uncertainties cast a damper on the consumer spending during the six months to June. Sogo Causeway Bay recorded a 4.8-per-cent decline in sales after footfall decreased 3.7 percent, however, the average ticket size at the store remained stable at approximately $910. He said the anti-extradition protests that took place in June also played a part in bringing down the traffic footfall and sales revenue of the store.
Despite the sluggish territory-wide retail sentiment, Sogo Tsim Sha Tsui achieved a 9.5-per-cent increase in sales during the period, having established itself as a popular shopping destination for tourists. Cosmetics and skincare products were the leading growth driver for the store, recording 14.3-per-cent growth.
The Sogo Rewards program continued to gain traction, with membership increasing to 657,000 as at June 30.
“The program has helped keep customers engaged and reinforced the group’s brand equity,” said Lau. Sales to members accounted for 55 percent of the total revenue at the Causeway Bay store during the period, up from 52 percent for all of last year.
Lau said the launch of the massive HD LED screen on the street-facing facade of the Causeway Bay Sogo department store has proven to be an effective advertising platform, reinforcing the flagship’s position as a prominent retail landmark in Hong Kong.
The group’s gross profit margin as a percentage of turnover remained stable at around 74 percent, and gross profit of HK$1.557 billion, was down 1.3 percent year on year. The net profit attributable to shareholders was $1.286 billion, up 44.8 percent, due to a positive investment income of $427 million being recorded during the period, compared with an investment loss of $56.2 million recorded for the same period last year.
Lifestyle International expects a challenging second half of the year as geopolitical tussles and waning global growth momentum further undermines business confidence and dampens consumer spending across the globe.
“Whilst prolonged China-US trade tensions and heightened economic uncertainties would pose challenges towards the Hong Kong economy, the city’s ongoing political and social unrest will cause further damage to the local economy, souring consumers’ appetites and suppressing investor sentiments in both the property and stock markets,” said Lau.
“Moreover, the anticipated weakening of the Chinese currency would also weigh upon inbound tourism and the spending of Chinese tourists.”