Retail sales dropped 10.1% in February

Consumer durable goods led the outlet-wide declines at 18.4%.

Hong Kong’s retail sales in February slumped 10.1% YoY in value, ending the growth trend since March 2017 and registering the biggest decline since August 2016, according to a report by Knight Frank.

All outlet types registered YoY drops in retail sales in February, led by the 18.4% decline seen by consumer durable goods. This was followed by retail sales in food, alcoholic drinks and tobacco and clothing, footwear and allied products which witnessed YoY dips of 13.7% and 11%, respectively.

In January and February 2019 combined, sales value registered a mild drop of 1.6% YoY.

David Ji, Knight Frank’s director of research and consultancy for Greater China, noted that the weak retail sales continued to reflect a cautious consumer sentiment caused by external uncertainties, which also exerted downward pressure on rents in core retail areas.

“In contrast, mainland visitor arrivals in the first two months of the year recorded a growth of 18.7% YoY. We believe that the new cross-boundary transportation links that have enhanced travel convenience from multiple mainland destinations to Hong Kong will continue to boost visitor arrivals, offering long-term support for the retail sector,” he added.

Landlords have reportedly been adjusting their leasing strategies to target local consumers and same-day visitors by embracing more mid-tier brands. Knight Frank noted that more affordable lifestyle brands taking up space in core shopping areas and in premium shopping centres.

Examples include Japanese discount megastore Don Don Donki’s upcoming 15,000 sqft flagship store in Mira Place Two, Sephora’s upcoming 4,000 sq ft-store in ifc mall, and Muji’s new store in Pacific Place.

“Looking ahead, the retail market is likely to register flat growth or even a mild drop in the first quarter of this year. Nevertheless, consumer sentiment is likely to be underpinned by favourable employment figures and an improving stock market,” Ji highlighted.

Together with rising tourist arrivals and new retail potential, he expects both retail sentiment and sales to improve in the second half of the year, albeit at a slow pace.