Luxury brands are likely to retreat from Hong Kong due to the ongoing pro-democracy protests that have weighed on third-quarter sales growth at firms like Cartier and Hugo Boss. Sales growth for companies making goods like jewelry, high-end fashion or handbags would come in at the low end of expectations.
Luxury brands, which have around 1,000 stores in the Asian shopping hub, are likely to start shutting some permanently. Hong Kong, which once accounted for around five per cent of global luxury sales, is now closer to two per cent. While the demonstrations might be a temporary disruption, a more structural shift is at play in the shopping habits of well-off customers from the Chinese mainland whose Hong Kong spending have long been buttressed sector sales. Despite China’s economic slowdown, shoppers are continuing to spend heavily on luxury - but they are increasingly staying at home because of a weaker currency that has blunted their overseas firepower. Meanwhile China has cut import duties and sales tax, eroding the competitive price advantage of foreign destinations like Hong Kong, London and New York. Chinese shoppers now make up 35 per cent of all industry sales - and they are on course to account for 90 per cent of growth in the market this year.