29 January 2020
Sa Sa chairman Kwok Siu-ming (right) and vice chairperson Eleanor Kwok report a 55 percent drop in its interim profit. Photo: HKEJ
Sa Sa chairman Kwok Siu-ming (right) and vice chairperson Eleanor Kwok report a 55 percent drop in its interim profit. Photo: HKEJ

Why Sa Sa is blaming politics for its dismal results

It’s natural for anyone to make excuses when things don’t go their way, but for Sa Sa, the reasons for its poor interim results are obvious.

The cosmetic retailer famous for its discounted items is blaming last year’s Occupy movement and the anti-parallel trading protests for driving away mainland tourists.

The company said retail sales in the six months to September fell 11 percent because of a 3.4 percent drop in tourist arrivals that contributed to an 8.5 percent drop in same-store sales growth, and the reason behind this is political.

In his interim results announcement, chairman Kwok Siu-ming said: “The Occupy Movement and anti-parallel trading incidents in Hong Kong damaged Hong Kong’s profile and discouraged tourists from visiting while also causing a drop in sales to local customers.”

Sa Sa said Hong Kong’s tourism sector as a whole has been losing its competitiveness because the substantially strengthened tourist facilities and convenient travel policies offered by other destinations have improved their attraction to mainland tourists.

The strong Hong Kong dollar and depreciating yuan further contributed to the slowdown of growth in mainland visitors to the territory.

For the six months to Sept. 30, the company said profit fell 55 percent to HK$153 million on a 10 percent fall in sales to HK$3.78 billion.

Why Sa Sa singled out the Occupy protests which ended last December as a factor for its weak spring and summer sales was not difficult to explain.

Its board of directors include Beijing-friendly Maria Tam Wai-chu and Leonie Ki Man-fung, who was behind Leung Chun-ying’s campaign for chief executive in 2012 and most recently the government’s proxy in opposing the appointment of former law dean Johannes Chan Mun-man as pro vice chancellor of the University of Hong Kong.

The company also noted the new restrictions placed on the frequency of visits by mainland residents, such as the change of Shenzhen residents’ multiple-entry permits to one visit per week upon renewal, have had an impact on mainland tourist arrivals.

Moreover, structural changes in the Hong Kong tourism industry also affected retail sales, Sa Sa said, citing the shift in the mainland market to lower-tier cities where tourists have less spending power.

To make matters worse, these tourists tend to have lesser brand awareness than those from more affluent cities, the company said.

The situation was exacerbated by the rise of cross-border e-commerce, which has facilitated the market penetration of cheaper and fast-to-market Korean products with concepts that are well liked by Chinese and other Asian consumers.

Looks like Sa Sa has a lot to deal with, but the counter ended the day with a 3 percent gain after the results announcement.

Still, worries over the lingering effects of the Occupy protests and the anti-mainland parallel trading incidents may just be a bit overdone.

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EJ Insight writer