Luk Fook to Trim Hong Kong Network

RAPAPORT... Luk Fook plans to scale back its Hong Kong store network and expand in mainland China and Macau as it becomes the latest jeweler to rethink how its spreads resources across the region.The retailer expects a "single-digit" decrease in the number of rental leases it renews in Hong Kong in the current financial year ending March 31, and a "double-digit" drop the following year, it said Thursday. That comes after sales slumped in the municipality at the end of 2019 amid mass street demonstrations and a decline in tourist arrivals."The group will reduce the number of shops in areas which are considerably impacted by the social incidents in Hong Kong," Luk Fook, which is headquartered in the municipality, said in a statement. It will "search for opportunities for opening new shops in [the] Macau market, and expects to have three net shop additions in [the] Hong Kong and Macau market altogether in this financial year."The retailer will also accelerate its expansion in the mainland, targeting at least 300 net store additions - after subtracting closures -for the current fiscal year, mainly as licensed shops in lower-tier cities. Luk Fook's same-store sales dropped 25% year on year in the third fiscal quarter ending December 31 amid mass street protests and lower tourist arrivals in Hong Kong, as well as the high price of gold. Sales declined 27% in Hong Kong and Macau combined, but Macau itself enjoyed an increase.Mainland China saw a moderate slowdown due to gold prices and the impact of the trade war with the US. Sales fell 3% at licensed stores, which account for 94% of its total, and slipped 12% at self-operated outlets.Hong Kong sales continued to decline in the first two weeks of January, but at a gentler pace, while growth continued in Macau, the company added.Last week, Chow Tai Fook said it planned to close up to 15 stores in Hong Kong by March 2021, with the retailer experiencing stronger growth in mainland China than in the protest-hit territory. Tiffany & Co. has also laid out a strategy to tap the mainland market, aiming to attract Chinese consumers who previously shopped in Hong Kong but are now spending domestically.Image: A Luk Fook store in Hong Kong. (Shutterstock)