Tse Sui Luen profits plummet as Hong Kong protests impact sales
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Tse Sui Luen profits plummeted in the first half as Hong Kong protests took their toll, especially during the September quarter.
The company, which operates stores under the TSL banner, has reported a 14 percent year-on-year decline in sales to HK$1.6552 billion ($US211 million) while Tse Sui Luen profits attributable to shareholders fell by 94 percent to just $1.6 million ($204,000).
Chairman and executive director Annie Lau said the year to date has been challenging for all businesses operating in Hong Kong, where TSL’s sales fell by 23.9 percent in the half-year and same-store sales were down by 26.4 percent.
“The outbreak of citywide protests and social unrest in Hong Kong in June has, when combined with the downward economic pressure being felt from the protracted US-China trade tensions and Renminbi depreciation, all conspired to devastate our retail business in Hong Kong.”
She said the depreciation of the Renminbi has reduced spending by mainland visitors, impacting Hong Kong sales, and shrunk earnings from Mainland China businesses in Hong Kong dollar terms, (where the company is listed).
“While the US and China have resumed trade talks, the economic outlook remains gloomy and shrouded in uncertainties as a trade consensus continues to appear beyond reach.”
Lau said the social unrest since June has weakened local consumer sentiment and the protests have made it challenging for retailers to operate.
“The hardship the local retail industry is facing is likely to persist or even worsen in the remainder of this financial year.”
“While the US and China have resumed trade talks, the economic outlook remains gloomy and shrouded in uncertainties as a trade consensus continues to appear beyond reach.”
She said the company was continuing to optimize its store network in Hong Kong and work with landlords to reduce its rental costs.
In Mainland China, TSL sales through self-operated stores were down by 8.5 percent overall and same-store sales fell by 7.5 percent, “mainly attributed to the protracted US-China trade war with tit-for-tat tariffs”.
During the six months, seven new self-operated stores and 41 new franchised stores were opened, taking the Mainland China network to 448.
“Going forward, we will take a cautious approach and optimize our retail network in Mainland China with the volatile market conditions being taken into consideration,” said Lau.
Meanwhile, TSL has now expanded its Malaysia store network to six after opening at Mid Valley Southkey Megamall in April. Sales there were up 16.5 percent.
On a more positive note, TSL’s e-commerce business grew by 27.7 percent year on year.
“We believe that this sector will grow to be a significant source of revenue for the group going forward,” said Lau. “Encouraged by the great response received from the group’s official website for Mainland China, we are working on developing an official website for Hong Kong and establishing our online presence on e-business platforms in order to further facilitate the online-to-offline and offline-to-online retail practice.”
Questions & Answers
Q.What is the total decline in sales for Tse Sui Luen across all its operations, and how does this compare to the profit drop?
What is the total decline in sales for Tse Sui Luen across all its operations, and how does this compare to the profit drop?
Overall sales declined by 14 percent to HK$1.6552 billion. This is significantly less than the 94 percent plummet in profits attributable to shareholders, which fell to just $1.6 million.
Q.Besides the Hong Kong protests, what other factors contributed to the company's poor performance in Hong Kong and Mainland China?
Besides the Hong Kong protests, what other factors contributed to the company's poor performance in Hong Kong and Mainland China?
In Hong Kong, factors included downward economic pressure from US-China trade tensions and Renminbi depreciation. In Mainland China, the protracted US-China trade war with tit-for-tat tariffs was the main contributing factor.
Q.How did Tse Sui Luen's sales in Mainland China compare to its performance in Hong Kong during the period?
How did Tse Sui Luen's sales in Mainland China compare to its performance in Hong Kong during the period?
TSL sales in Mainland China's self-operated stores were down by 8.5 percent with same-store sales falling by 7.5 percent. This is less severe than the 23.9 percent sales drop and 26.4 percent same-store sales decline seen in Hong Kong.
Q.What initiatives is the company undertaking to mitigate losses and explore growth opportunities?
What initiatives is the company undertaking to mitigate losses and explore growth opportunities?
The company is optimising its Hong Kong store network and seeking rental cost reductions. They are also taking a cautious approach to their Mainland China network and focusing on growing their e-commerce business, which grew by 27.7 percent.
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