Chow Tai Fook Jewellery Group Ltd. is seeking a 20 percent reduction in rent for some of its stores in Hong Kong when contracts come up for renewal this year, as sales of luxury items plunged in the city.
The company has already obtained rent cuts of between 10 percent and 20 percent so far this year, compared to the previous contracts for some stores, Managing Director Kent Wong said, without quantifying the number of shops. About 30 of its outlets in Hong Kong will come up for renewal in 2015, he said.
This year is a “very special year that we can negotiate with the landlord,” Wong said in an interview in Hong Kong on May 8. “We are demand driven; we expect we can have a 20 percent rental reduction.”
Hong Kong’s retail rents are falling as China’s slowing economy and its clampdown on corruption and extravagance crimped consumer spending. Wealthy Chinese tourists also chose other travel destinations. The city saw the first monthly drop in visitors since June 2009 in March, when sales of jewellery, watches and clocks also fell for the sixth straight month.
Chow Tai Fook’s same-store sales in Hong Kong, Macau and other markets dropped 26 percent in the three months ended March from a year earlier, dropping for a fifth quarter. The company may shut down one or two stores in Hong Kong this year, including a branch on the Peak, Wong said.
Read more at Bloomberg Business.