NEWS : Hong Kong luxury sector’s downturn


In signs that the luxury downturn in China has well and truly hit Hong Kong, LVMH and Kering have announced actual and probable closures in the city.

For LVMH, the combination of high rents and lower customer numbers have lead to the imminent closure of their Russell St TAG Heuer boutique.

In the case of Kering SA, whose half year results for 2015 showed a downward trend in the Asia-Pacific region (although China, South Korea and Australia are up), Hong Kong’s high rents and a need to be realistic about the Hong Kong and Macau markets have resulted in serious consideration of boutique closures for their brands. With fifty-eight retail shops in Hong Kong, there has been an arguably rapid expansion in the last half a dozen or so years by these brands in Hong Kong to take advantage of the mainland market; perhaps this is a ‘correction’ of sorts.

In May 2015 the Federation of the Swiss Watch Industry (FH) reported a total value of 1.7 billion CHF in exports. In the most recent FH report covering June which was published on 21 July 2015, watch exports totalled 1.9 billion CHF in total, an increase of 3.3% on June 2014. For the first six months of 2015 there was a +0.4% increase on the same period in 2014. The total number of timepieces rose; there was a growth of 8.1% for watches under 3,000 CHF and an increase of 4.5% for watches costing over 3,000 CHF.

Most main export markets recorded positive results but Hong Kong, which is our point of interest here, fell for the fifth consecutive month (-21.2%). China’s June downturn was -9.2%, which has meant a drop down to eighth place.

For the Hong Kong market, the FH reports that the value in millions of CHF for the January to June period were 1,615.9 for 2015, 2,008.3 for 2014 and 1,923.8 for 2013. The % change between 2014 and 2015 was -19.5%.

If we look at non-watch related brands, Hong Kong-listed Chow Tai Fook Jewellery Group plans to close two stores in Hong Kong as a result of poor sales and a huge 20%-30% fall in the number of customers. In the first quarter of 2015, Prada had 33 stores in China (versus 49 in 2014), Armani dropped from 49 to 44, and Chanel went from 22 to 11.

However, it is not all gloomy news from everyone. Jean-Claude Biver, head of LVMH’s watchmaking division, told Bloomberg that he expects growth for Hublot and Zenith in Hong Kong in the next two years.

Categories: Hong Kong, Industry news, News, TAG Heuer, watches


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