Louis Vuitton is planning to close one of its stores in Hong Kong, where ongoing anti-government protests have considerably disrupted business, according to a report published today in the South China Morning Post newspaper.
The LVMH Inc.-owned luxury retailer, which operates eight stores in Hong Kong, is shuttering its location in the Times Square mall in the Causeway Bay shopping district. The decision comes after Louis Vuitton reportedly failed to reach an agreement with mall owner Wharf Holdings to reduce the rent on its second-floor space (estimated to be about HK$5 million a month). The French label also is temporarily shifting some of its Hong Kong sales personnel to its stores in mainland China.
Louis Vuitton is the first luxury player to take such drastic action as months of political unrest have kept tourists away and put a significant dent in retail sales in the area. According to the latest data from the Hong Kong Tourism Board, only 2.65 million people visited in November 2019, a decline of 56% from the same period last year. International tourists and visitors from mainland China historically account for as much as 70% of luxury purchases. Hong Kong’s retail industry, meanwhile, saw sales plummet 23.6% in November, the tenth-consecutive month of declines, according to government data.
Brands such as Louis Vuitton are certainly feeling the squeeze on their own balance sheets. LVMH reported a 25% slump in its Hong Kong sales in the third quarter, and Gucci, Salvatore Ferragamo, Moncler and others have seen even bigger declines. Following Louis Vuitton, Prada is said to be closing its Causeway Bay location in March 2020 (although the decision was made before the protests began), while other labels are putting store-opening plans on hold. For instance, luggage maker Rimowa had intended to open its 10th shop in the Lee Garden mall, but the brand is now waiting until the political situation improves.
A report released last month by the Hong Kong Retail Management Association estimates that 7,000 retail locations out of 64,000 registered would be shuttered within the months to come. Widespread layoffs are also likely. Thirty percent of businesses responding to HKRMA’s survey said they will be forced to make cuts (on average by 10%) in the next six months if conditions hold or worsen. This would mean that more than 5,600 retail workers would lose their jobs.
Meanwhile, the unrest shows no signs of abating. Some 400 people were arrested in New Year’s Day demonstrations when a march descended into violence and chaos. Protestors on Thursday attacked several HSBC branches and vandalized the iconic pair of lions that guard the bank’s city-center headquarters.
Louis Vuitton did not immediately respond to FN’s request for comment.
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