Harvey Nichols suffers as Mainland Chinese tourists ‘disappear’

Declining Mainland Chinese visitors to Hong Kong have put a dent in Dickson Concepts’ sales and profit in the first half of its fiscal year.

Dickson Concepts, which owns the Harvey Nichols department store network, has reported a 6.6 percent decline in sales to HK$1.713 billion (US$218.8 million), and net profit attributable to shareholders down 10.9 percent to $119 million.

But it was a tale of two quarters, according to chairman Sir Dickson Poon.

“The group achieved significant growth in both sales and profit in Hong Kong during the initial few months. However, the retail climate in Hong Kong deteriorated significantly thereafter and Mainland Chinese tourists all but disappeared.”

The impact of that was partially offset in Taiwan where like-for-like profits increased by 169 percent as a result of margin improvement and cost and inventory control.

Sir Dickson did not mince words in his shareholder announcement, describing the outlook for Hong Kong retail as “bleak”.

“The group is extremely pessimistic about the retail climate in Hong Kong. Trading has been adversely affected and sales have been achieved at the expense of margin. Meanwhile, fixed costs remain very high. Additionally, the group does not expect a return of Asian and Mainland Chinese tourists in the foreseeable future. The significantly worse result could be expected in the second half of this financial year. With Hong Kong in recession, the future looks bleak.”

Dickson Concepts opened the new Harvey Nichols store at Pacific Place on September 19, the first of its new generation stores globally, mixing the company’s online and offline stock seamlessly using interactive displays and digital technology.

“The new store has been well received since its opening,” said Sir Dickson. “We are confident that the store and the new model will become a long-term success.”

By combining interactive digital displays alongside traditional physical display units, the store now showcases more than three times the number of products within half the floor space, thereby enabling an increase in sales density with significantly reduced fixed costs, while offering customers “a truly differentiated shopping experience”.

Despite the gloomy era in Hong Kong, Sir Dickson said the company has net cash of $1.728 billion and a strong balance sheet.

“The group is in a strong position to cope with Hong Kong’s recession and the very difficult retail climate.”