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Is Hong Kong's retail industry really hopeless? This is one of the topics I have talked about after waiting for people to eat melon.
In this rapidly changing age, Hong Kong seems to have found the standard answer in the past two years: the retail industry is really in a hurry this time...
Looking back on the experience of Hong Kong retail industry since mid-last year, the difficulties can be described as wave after wave. This is really hopeless, because the Hong Kong retail industry has fallen into a pit before it can react. In the cold wind of Hong Kong's retail industry, once a large number of mainland China also took the opportunity to save a lot of money, Hong Kong retail companies have complained again and again, including Hong Kong local cosmetics retailer Sa Sa International (00178-HK).
Hong Kong is a paradise for shoppers. Cosmetics is one of the most popular purchases for shoppers and is very sensitive to market changes. Undoubtedly, Sa Sa International has fallen into an existential crisis in this cold winter of the retail industry, and it is difficult to conceal its decline.
Sales in Hong Kong and Macau during the Spring Festival plummeted by 76.9% year-on-year.
Sasha International, which had just been relieved from the social events in Hong Kong last June, was hit by the new type of coronavirus pneumonia in the process of entering the Year of the Rat.
On February 6, Sasha International announced that the Group's retail sales performance during the Chinese New Year in Hong Kong and Macau was inferior, down 76.9% from last year, while same-store sales fell by 75.5%.
In the Hong Kong market, the retail sales of Sa Sa International dropped by 77.9% compared to last year, mainly due to the new coronavirus incident. The decline in the number of mainland visitors to Hong Kong expanded again on the basis of social events, and the consumption sentiment of local Hong Kong customers was also sluggish. . According to information from the Hong Kong Immigration Department, the number of mainland visitors to Hong Kong during the Chinese New Year plummeted 85.5% year-on-year. The sharp drop in overall traffic led to a 54.4% drop in overall transaction volume. Among them, mainland visitors fell by 92.1%, while Hong Kong local visitors fell by 8.0%. In addition to the Hong Kong market, the Macau market of Sa Sa International is not immune. Retail sales in the Macau Special Administrative Region fell by 73.4% compared with last year, mainly due to the nearly 70% drop in overall transaction volume. Among them, mainland visitors dropped by 76.5%, and Macau locals fell by 29.4%.
The impact of this epidemic has just begun, and many domestic experts are unable to give specific answers for how long it lasts. So, has the sales performance of Sasa International really hit the bottom during the Chinese New Year? The answer is almost no. The SARS outbreak 17 years ago lasted for half a year, and it was only fundamentally contained in the summer of 2003. In 2003, when SARS was raging, Hong Kong's deserted retail industry dropped by 2.6%. If the retail industry in Hong Kong suffered the biggest crisis since SARS in the second half of last year, then the menacing epidemic is deeper and broader than the crisis caused by social events, because the epidemic is at the time of the Spring Festival, and the scope and severity of the epidemic is ten years. It happened once, and it is still a little far away from the summer that is very conducive to containing the virus.
In the six months ending September last year, Sasha International recorded a net loss of HK$36.53 million, while the company made a profit of HK$200 million in the same period last year. This has also led to the first interim loss of Sasa International in 17 years. For this reason, Sasa International stated that it would not distribute interim dividends, thus ending the history of continuous interim dividend payments since 2000. The mid-term loss was mainly due to the impact of the social movement in Hong Kong starting in June 2019. From June to November 18, 2019, the turnover and same-store sales in the Hong Kong and Macau markets plummeted by 39.4% and 39.1%; this year’s New Year’s The decline in turnover and same-store sales was nearly twice that during the aforementioned period, indicating that the crisis brought about by the epidemic is the most serious. As the epidemic continues, the operating performance of Sasha International in 2020 will not be optimistic. As a result of the raging epidemic of
, the share price of Sasha International fell. From January 20th to February 7th, the stock price of Sa Sa International dropped as much as 20.99%, a new low since December 2008.
Diversified self-help, executive directors take the lead in reducing salaries by 75%!
As one of the most well-known cosmetics retail groups in Asia, Sa Sa International has been established for 42 years. At its peak, Sasa International had 273 retail stores in 2018, operating income exceeded 8 billion Hong Kong dollars, selling more than 700 brands, a total of more than 18,000 kinds of skin care products, perfumes, cosmetics, hair care and other products, and Brand-name products of our own brand and exclusive agency.
But entering 2019, Shasha International has gone into decline. According to Sasa International 's third-quarter results for the year ended December 31, 2019, the number of Sasa International retail stores fell to 265.
In the context of Hong Kong’s deteriorating business environment and high costs leading to the first loss in the interim report, Sasha International said in January this year that it plans to close about 20% to 25% of stores in the next 18 months, most Mainly in the tourist areas with greater impact, and closed 6 in the third quarter of fiscal year 2019, including the loss-making Singapore business.
In addition, Sasha International 's inventory is in the form of cash holdings, too much inventory will seriously affect the company's cash flow. Although the inventory level on September 30, 2019 decreased by HK$222 million year-on-year, it was still as high as HK$1.492 billion. In order to alleviate the high cost caused by inventory, Sasha International announced to increase optimization of product and inventory management, clean up low-productivity products or excessive inventory, so as to free up space to introduce popular products with high sales and effectively attracting people.
Sasa International 's heavier throttling action is behind. Recently, the company released a relentless move. All executive directors will take the lead in reducing their salaries by 75% for three months as the first step in a new round of cost reduction programs. It is worth noting that, in order to control costs, 萨莎国际 has reduced the number of employees by 200 in the 2017-2019 fiscal year. As a result, the employee benefit expenses for the six months ended September 30, 2019 have dropped to 555 million Hong Kong dollars. . During the reporting period, the director's remuneration of Sasha International was only HK$671,000, which was only 0.012% of the current employee benefit expenses.
thus shows that the double blow of social events and the epidemic in Hong Kong has directly affected the survival of 莎莎国际, and the poor fortune of 莎莎国际 has even moved out the policy of drastically cutting executive salaries.
In fact, under the predicament, many affected companies in Hong Kong have laid off employees or cut salaries to achieve the "anti-epidemic" effect. Cuihua Holdings, which holds the well-known Hong Kong restaurant brand "Cuihua Tea Restaurant", (01314) -HK) recently announced that "all directors and company executives will cut their salaries by 30% this month for a period of three months"; and Hong Kong Airlines plans to lay off about 400 employees, accounting for about 10% of the company's total employees.
2020 is likely to be worse than 2019
Hong Kong retail is still in decline. The source of income of 莎莎国际 mainly comes from the Hong Kong and Macao markets (accounting for over 80%). Under the overall decline of the local retail industry, 莎莎国际 One can imagine the operating pressure.
Affected by social events, the initial number of visitors to Hong Kong in 2019 was 55.91 million, a year-on-year decrease of 14.2%. Industries such as retail, tourism and catering were the first to bear the brunt. Hong Kong's GDP was dragged down and fell 1.2% in 2019.
The Hong Kong Census and Statistics Department announced that retail sales in the second half of last year continued to experience double-digit declines. The total retail sales value for the whole year of last year was provisionally estimated at HK$431.2 billion, down 11.1% year-on-year, the first drop in three years, and it rose 8.7% in 2018. Xie Qiu Anyi, chairman of the Hong Kong Retail Management Association, recently stated that Hong Kong's retail market has entered a "super winter period."
Among them, from the second half of 2019 to present,Hong Kong's total retail value of cosmeceuticals has fallen far more than expected. With the uncertainty of the duration of the epidemic, the recovery time of Hong Kong's local retail industry and tourist confidence may be as long as one year.
Xie Qiu Anyi pointed out that retail sales will drop by 10% to 20% in the first half of this year, but the factors of the epidemic are not taken into account. At present, depending on the situation of the epidemic, the drop in retail sales in the first half of this year will be more than 10% to 20% , There may be a median double-digit decline.
If Sasa International fell to the bottom of history in 2019, then in a market with bleak prospects, Sasa International will continue to fall into a deeper bottom in the Hong Kong retail market in 2020. So in the mainland market outside of Hong Kong and Macau markets, can Sasa International take this to turn around? the answer is negative. In order to get rid of the dependence on the Hong Kong and Macau markets, Sasha International adjusted the regional income structure in 2005 and expanded its stores to the mainland market. But although the ideal is full, the reality is cruel: Sasha International has been cultivating in the Mainland for nearly 14 years and still has difficulty making profits. In the 2015-2019 fiscal year, the annual continuous loss is between 10 million Hong Kong dollars and 40 million Hong Kong dollars. The proportion of revenue in the mainland market is still at a low 3.8%.
Author: Tan Han count
Editor: Shang Peng Jing
