Luxury giants, including Kering, LVMH and Burberry, have threatened to close their branches in Hong Kong if landlords refuse to lower their rents amid a slump in business, Apple Daily reported on Thursday.
Retail shops have reported plunging revenues as the number of mainland visitors to the city continues to decline, the newspaper said.
Jean-Marc Duplaix, finance director of Kering SA, which owns Gucci, Balenciaga and other luxury brands, said its business in Hong Kong has not improved over the past six months.
Duplaix said the company will close some of it local stores if rents are not cut.
Many landlords in the city don’t seem to realize that the market environment has changed and they cannot continue to charge high rents while the retail sector continues to suffer, he said.
LVMH, the owner of luxury brands such as Louis Vuitton, Dior, Fendi and Marc Jacobs, is also questioning the high rent levels in Hong Kong.
Financial director Jean-Jacques Guiony said the company has held multiple negotiations with landlords about cutting their rents but whether they will agree remains a question.
Carol Fairweather, financial director of UK-based Burberry, said its 17 branches in Hong Kong saw a double-digit drop in sales in the first quarter of the year.
Although the company is still profitable in the city, it has been reviewing its branch network and asking landlords to cut rents.
LVMH and Kering operate a combined 130 independent stores selling apparel, jewelry and watches in Hong Kong, while Burberry has about 10 stores, the newspaper said.
Wharf Properties’ Times Square in Causeway Bay and Harbour City in Tsim Sha Tsui will be most affected if the three luxury giants, which have about 40 shops in the two shopping malls, succeed in having their rents reduced.
However, Chan Yiu-fung, director of real estate consultancy Jones Lang LaSalle in Hong Kong, said landlords of major shopping malls are not likely to give in to the luxury giants’ demands easily as their sites are more capable of attracting shoppers.
Chan expects a 3 percent rise in rents in local malls on average, compared with a 20 percent drop in rents in street shops.
– Contact us at [email protected]