Jewelry retailer to upgrade its operations after rent reduction
Updated: 2015-09-05 08:06
By Sophie he in Hong Kong(HK Edition)
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Chow Tai Fook Jewellery Group, a Hong Kong-based jewelry retailer, said it has secured a 20 to 30 percent reduction in rent from its landlords in Hong Kong this year. This is because of the gloomy retail market in the city.
Every year, about one-third of Chow Tai Fook's stores in Hong Kong renew their leases. This year, when the stores renegotiate and renew the lease, the company would see the rental drop by 20 to 30 percent, Henry Cheng Kar-Shun, chairman of Chow Tai Fook, told China Daily.
"It (the drop in rental level) depends on the performance of different districts; if it is a good district with large number of consumers, the landlords may be reluctant to cut much of the rent, if not, the rental level will decrease," Cheng said.
As at March 31, Chow Tai Fook had 133 stores in Hong Kong and Macao.
Cheng noted that due to the slower growth of the mainland economy, the central government's anti-corruption campaign as well as the depreciation of the renminbi, the retail market in Hong Kong had not performed well in recent months.
The value of Hong Kong's retail sales in July fell by 2.8 percent to HK$37.6 billion year-on-year, according to the Census and Statistics Department. The sales value of jewelry, watches and clocks, as well as valuable gifts, declined by 5 percent during the same period. Sales of luxury goods fell by nearly 16 percent in the first half of this year.
The plunge in retail sales is partially due to the decrease in mainland visitors. Visitor arrivals from the mainland dropped 9.8 percent in July, according to the Hong Kong Tourism Board.
Cheng said that since the retail market in Hong Kong was "slow", Chow Tai Fook would use this time as an opportunity to readjust its business. This includes optimizing its business system, reinforcing its logistics and improving some of its underperforming stores.
According to local reports citing the company's managing director Kent Wong Siu-kee, Chow Tai Fook plans to close four stores.
Meanwhile, Chow Tai Fook will continue to expand on the mainland to tap into the vast market which currently outperforms Hong Kong's, according to Cheng.
The company is also boosting e-commerce, as it offers the potential for more revenue.
Wong said that currently revenue generated from online sales accounted for about 2 percent of total revenue recorded on the mainland. Hopefully in about three to five years, online sales would contribute 5 percent of its revenue from the mainland, he ventured.
Chow Tai Fook is set to open a shopping mall in Qianhai, Shenzhen, to sell diapers, baby formula as well as jewelry and watches, Cheng said.
"I hope that the products in the shopping mall are 100 percent from Hong Kong, and the prices of products are the same as they were in Hong Kong. Then some of the frequent mainland travelers won't need to be in Hong Kong to purchase necessities."
Separately, on Thursday Chow Tai Fook unveiled its Cullinan masterpiece A Heritage in Bloom. This is a necklace centered upon 24 D-color internally flawless diamonds cut from a 507.55 rough diamond of Cullinan Heritage the company acquired in 2010. The largest diamond cut from the rough diamond is 104 carat.
Chow Tai Fook Jewellery Group's share price gained 2.06 percent to close at HK$6.95 on Friday. The benchmark Hang Seng Index was down 0.45 percent to 20,840.61 at the close of trading.
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With the lukewarm market performance in Hong Kong, Chow Tai Fook Jewellery Group plans to continue its expansion on the mainland to tap into the vast market which currently outperforms Hong Kong's. Asia News Photo |
(HK Edition 09/05/2015 page6)