LV And Prada Have Been Evacuated, And Luxury Paradise Hongkong Has Fallen.

In January 3rd, a piece of news shocked the luxury circle.

According to the sources quoted by South China Morning Post, the world's largest luxury goods group LVMH will close its Louis Vuitton brand flagship store in Times Square, Tongluowan, Hongkong, because Hongkong Times Square refuses to rent less than HK $5 million in monthly rent.

Louis Vuitton in Hongkong customs shop caused netizens ridicule: even the world's most profitable luxury group can not afford to rent Hongkong?

Prada and LV are pulling away.

"No news has been received yet, but if the situation is more chaotic, there may be some considerations. The shop is still open." Hongkong times square Louis Vuitton shop replied to China Economic Weekly.

LVMH Group official website information shows that at present, Louis Vuitton has 8 branches in Hongkong, including two branches in Tongluowan, which are located in Liyuan shopping mall and Times Square. Previously, the group announced that it will open ninth branches at Hong Kong International Airport in 2021.

According to LVMH's earnings report, the total revenue of parent company LVMH group reached 46 billion 900 million euros in 2018, of which the contribution from the Hongkong market reached 6%. In the third quarter of 2019, LVMH's revenue in the Hongkong market fell by 25%.

Many tourists who often go shopping in Hongkong express great emotion. Russell street in Wanchai District of Hongkong is much less popular than before. This street, which is only 250 meters long, has always been regarded as a barometer of the sales of luxury goods in Hongkong. It is a long barometer for Tongluowan. Since 2003, Hongkong launched the "free travel" plan for tourists from some mainland provinces, and the international luxury brands gathered on Russell street once created a golden age.

The 2018 annual report of Dead Leung Ban's "main street of the world" shows that in 2018, Russell street in Tongluowan, Hongkong also boarded the most expensive section of the world. The rent was as high as $2671 per square foot per year, and the Fifth Avenue in 2017 ranked the second highest in the world.

But in half a year, "luxury paradise" fell in Hongkong.

Take the Times Square Mall as an example, according to media reports, there are at least one vacant berth on each floor, of which 6 floors have at least 6 berths vacant. The world trade center, which is about 10 minutes' walk from Times Square, is more serious. There are at least 3 vacant berths on the first floor of the shopping mall. Most of the two floors are for rent, and the vacancy rate exceeds 60%.

Italy's luxury brand Prada is the first to be carried. In recent years, the poor old brand of luxury has closed the Prada store in Russell street, Tongluowan, Hongkong. In June 2019, the stores in Plaza 2000 of Tongluowan reached 15 thousand square feet, with a monthly rent of HK $9 million.

Wu Tianhai, the boss of times square and chairman of the Kowloon warehouse group, had previously admitted that the retail industry in Hongkong is experiencing a storm, and the business of merchants is difficult to do, especially for shopping centers. Now it is a prophecy.

Hongkong's retail industry has fallen to freezing point?

The removal of luxury brands is, on the surface, caused by rent, which reflects the reality of Hongkong's retail data falling to freezing point.

In October 2019, total retail sales in Hongkong hit a year-on-year decline.

At that time, Lin Zhengyuee, chief executive of the Hongkong Special Administrative Region, told the media that recently, a number of economic data show that Hongkong's economy has entered a grim situation. She said total retail sales fell 24.3% in October 2019 compared with the same period last year. The year-on-year decline is the most serious since the record, and the unemployment rate is expected to rise again from the current 3.1%.

Lin Zhengyuee said that the SAR government will make good use of its financial capacity to solve difficulties for the people of Hongkong, and strive to closely monitor the situation and introduce support measures to support enterprises and ensure employment.

According to the data released by the statistics office of the Hongkong Special Administrative Region in January 3rd, the retail sales in Hongkong dropped to 23.6% Hong Kong dollars in November 2019, down to 30 billion Hong Kong dollars, which has declined for 10 consecutive months. Sales of jewellery, watches, watches and clocks and precious gifts decreased by 43.5% compared with the same period last year. Sales of pharmaceuticals and cosmetics decreased by 33.4% compared with the same period last year. Sales of department stores decreased by 32.9% compared with the same period last year, while sales of footwear and other clothing accessories decreased by 31.5% compared with the same period last year.

Meanwhile, there were only 2 million 650 thousand visitors in Hongkong in November 2019, down 56% from the same period in 2018. The Hongkong Retail Management Association predicts that nearly 7000 enterprises or more than 10% of the retail businesses will be forced to close in the next 6 months. The entire luxury fashion retailing industry has been hit hard in this market.

Chen Maobo, the financial secretary of Hongkong, warned earlier that the gross domestic product of the whole fiscal year is expected to shrink by 1.3%. He added that the government is in the first budget deficit in 15 years.

The Hongkong SAR government has launched four rounds of relief measures in the past few months, totaling more than HK $25 billion, to relieve the economic difficulties.

Who will be the next shop to withdraw?

"When will tourists return to Hongkong? Maybe I should ask, will they come to Hongkong again?" said Ashley Micklewright, President of blue bell group. As Asia's largest luxury and lifestyle brand agent, blue bell group is asking its brand store in Hongkong shopping center to cancel the basic rent to share the loss of group turnover.

Micklewright said that in the past 6 months, the blue bell group's sales cut by 60%, and the discount offered by the shopping mall from August 2019 to October is totally unable to restore the decline. So the group may shut down two of the 22 brand stores distributed in 19 Hongkong shopping malls.

Statistics show that the blue bell group has helped many famous brands such as the famous underwear brand of Vitoria and the French luxury brand LV enter the Asian market. Currently, it has more than 150 brand partners and 3500 employees in Asia.

A luxury agent told the China Economic Weekly reporter that thanks to the friendly and transparent business environment, relatively low taxes, efficient infrastructure and consumption atmosphere, Hongkong has attracted many luxury brands to open stores in the past 30 years, and has become the headquarters of many luxury goods groups in Asia.

"We do business, but violence in Hongkong seriously interferes with tourism and consumption related activities, and further inhibits consumption." The agent said.

Analysts at the US investment bank, Jack Fu ray, predict that the ongoing violence in Hongkong may make the British luxury brand Burberry lose about 100 million pounds by April 2020.

Gucci's parent company, Kai Yun group and Moncler group, released its third quarter results at the end of October 2019, of which Hongkong sales dropped 35% and Moncler Hongkong's sales plunged 40%.

Cosmetics companies are also not immune. Estee Lauder group recently lowered its annual profit forecast, one of the reasons is that sales in Hongkong have dropped by 20% in the first quarter.

Xie Chiu Yi, chairman of Hongkong Retail Management Association, predicts that the total retail sales in Hongkong will double in 2019 and decline in 2020. When to stop falling, it will depend on when the society will quell violence and when will it rise again.