Reports out of Hong Kong suggest that luxury goods giants, including LVMH, Burberry and multi brand house Kering have threatened to close branches in the city should landlords decline appeals to lower retail rents.
The high-end retailers have suffered a steep deterioration in sales as the volume of mainland visitors to Hong Kong has waned and cheaper alternatives such as Tokyo with a weak Yen, work hard in attracting Chinese tourists.
Jean-Marc Duplaix, finance director of Kering SA, which owns Gucci, Balenciaga and other luxury brands has indicated that the company will close some of it local stores if rents are not reduced. Similarly LVMH who own the stable of brands embracing Louis Vuitton, Dior, Fendi and Marc Jacobs, is also said to be questioning the high rent levels in Hong Kong. Burberry the UK brand said sales in Hong Kong recorded a double-digit fall through the opening quarter of the year.
When it comes to negotiating rentals Hong Kong landlords are not known to be especially altruistic however the combined weight of the luxury brand retailers with around 140 outlets may help to dilute the rigidity.
The prime retail brands along Singapore’s Orchard Road have also been going through a tougher retail environment with rents there also playing a part.
It could also indicate that the demand for the top end luxury goods is going through a transformation in the region. Consumers may now prefer to seek out on line alternatives or find they do not necessarily need a new bag every six months, while unpredictable property and equity markets might also be playing a part on purchasing decisions.
