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The Hong Kong Protests: What Brands Need to Know

As the city's retail sector braces itself for a double digit decline, Richemont, Kering and DFS are already seeing an impact.
Protesters in New Town Plaza shopping mall in Hong Kong | Source: Shutterstock
  • Sam Gaskin

HONG KONG, China —  Protests that began in reaction to a proposed extradition law, and have since broadened to a fight for Hong Kong's autonomy more generally, reached Hong Kong International Airport on Friday July 26. Over 1,000 protestors in black occupied the arrivals hall the same day that Calvin Klein reportedly opened a new store at the airport.

The airport is yet another retail environment disrupted by protests which have already led to store closures on the city's shopping streets and in malls. Riot police forced protestors out of the New Town Plaza shopping mall in Sha Tin on July 14, pushing them past Kenzo, Bally and Coach stores under a volley of umbrellas that protestors threw like spears. Tens of thousands of protestors also returned to popular shopping streets in Central and Causeway Bay on Sunday where they were met with tear gas and rubber bullets in what was the eighth consecutive weekend of protests.

Retailers in the city were already beginning to hurt before the protests began in June. The Hong Kong Census and Statistics Department says retail sales fell 1.8 percent for the first five months of 2019 compared with the same period in 2018. Now, with the unrest escalating, retailers and analysts have downgraded Hong Kong's prospects for the rest of 2019.

July and August are normally peak season for the industry, according to the Hong Kong Retail Management Association (HKRMA), but “as the protests continue and further spread to different districts, our members forecast a drop by double digits in the next months,” they predicted in a press release.


The HKRMA has now revised its total retail sales projections for all of 2019 from single-digit growth to double-digit decline. That's even bleaker than PwC's forecast of a 5 percent decline amounting to HKD 460 billion ($58.9 billion) from 8.8 percent growth reaching HK$485.2 billion ($62.2 billion) last year. PwC's estimate was made at the end of June, before the protests and responses to them escalated to current levels.

As the protests continue and further spread to different districts, our members forecast a drop by double digits.

Several global luxury brands have already felt an impact. On Thursday July 25, Swiss luxury-goods maker Richemont joined Swatch Group AG in saying that the demonstrations had led to lower local sales due to store closures and lower tourist arrivals. Kering Chief Financial Officer Jean-Marc Duplaix attributed underperformance in Hong Kong and Macau in Q2 to "a combination of high comps, repatriation of Chinese demand and, more recently, some disruption in Hong Kong."

On LVMH's 2019 half year earnings call, CFO Jean-Jacques Guiony, said, "we haven't really felt any impact of what's happening in Hong Kong on our business. That's June. What happens in July is too early to say." But he also said that travel retailer DFS, which is majority-owned by LVMH, had experienced a "slowdown" in Hong Kong and Macau in recent months.

When asked whether Chanel was reconsidering plans to show its 2019/20 cruise collection at the Kai Tak Cruise Terminal in Hong Kong on November 6 in light of the protests, a spokesperson for the brand said, "Like all brands present in Hong Kong, we are of course keeping a close watch on events, and have not yet made a decision. "

Stock prices of Hong Kong fashion and beauty companies Giordano International and Bonjour Holdings have dropped around 27 percent and 24 percent respectively since the beginning of the year, while the stock price of Aeon Stores Hong Kong, which operates retail stores and shopping centres, has fallen around 9 percent.

Among the most lucrative shopping hubs in the world, Hong Kong is the last place fashion retailers want to see their businesses disrupted. Real estate services firm Cushman and Wakefield said that at $2,671 per square foot per year, Causeway Bay beat out New York City’s upper Fifth Avenue ($2,250 per square foot per year) and London’s New Bond Street ($1,744 per square foot per year) to become the most expensive retail street in the world in 2018.

The area has come under pressure [and] we currently forecast a mild drop in rents.

Reed Hatcher, head of Research, Hong Kong at Cushman & Wakefield, says street front rents in Causeway Bay actually rose 2.3 percent year on year in Q2 thanks to new transport links including the Hong Kong-Zhuhai-Macau Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link that increased the number of mainland Chinese tourists visiting Hong Kong. However, he said, “the area has come under pressure in the past couple of months from the ongoing social unrest and we currently forecast a mild drop in rents, by around 1 to 2 percent, over the next six months.”

Hatcher is also predicting a decline of 3 to 5 percent in the Central district of the city.


While the protests are a major factor in the HKRMA’s gloomy outlook, Michael Cheng, Asia Pacific and Hong Kong/China Consumer Markets Leader for PwC, also attributed their forecasted 5 percent decline in retail sales to other factors including the China-US trade dispute, turbulence in the equity market and the volatility of the Renminbi. PwC also expected a decline in the growth of tourist arrivals to hurt retail sales through the rest of 2019.

Brands now find themselves between a rock and a hard place and some have already got caught up in the conflict. In June, Nike cancelled the mainland China release of its collaboration with Undercover after the designer Jun Takahashi voiced his support for Hong Kong protestors on Instagram.

On July 24, an H&M employee in Hong Kong was spotted and photographed sporting a hardhat — a “symbol of silent protest” against the government — while manning the cashier, provoking backlash from mainland Chinese netizens. Soon after, in an apology published on H&M’s Weibo account, the brand voiced its support of Beijing’s “One Country, Two Systems” principle and Hong Kong’s “stability and prosperity,” adding that the employee would be spoken to immediately.

At present, around 500 of H&M’s 4,700 stores are located in China, where it generated around 11 billion Swedish crowns ($1.3 billion) of its total 200 billion in revenues last year.

While some have been quick to blame protestors for disrupting business, others argue Hong Kong’s autonomy is what makes it an appealing place to conduct business in the first place. According to the Fraser Institute’s Economic Freedom of the World index, Hong Kong is the most free economy in the world. The People’s Republic of China is ranked 100th.

Additional reporting by Zoe Suen.

Related Articles:

Hong Kong Protests' Impact Spreads as Luxury Brands Get HitOpens in new window ]

Hong Kong Retail Sales Drop for the First Time in Two YearsOpens in new window ]

Richemont Watch Sales Stall as Hong Kong Protests BiteOpens in new window ]

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