- Leading furniture retailer says it is trying to negotiate rent reduction with landlords
- If retail woes continue, more staff cuts and leases on another eight stores may not be renewed, chairman says
Hong Kong furniture retailer Pricerite Group said it is taking more drastic cost-cutting measures than when it dealt with the Sars outbreak in 2003. It faces an "uphill battle" if landlords do not cut rents quickly enough to help the industry overcome the impact of the coronavirus epidemic.
The company, whose home furnishing and household goods outlets, has closed four branches over the past nine months when anti-government protests hit foot traffic and pummeled sales. It may surrender leases on eight more stores as the latest health scare delivers another blow to its bottom line.
Sales have come under tremendous pressure and customer flow has been reduced by 30 per cent in the past nine months, it said in a statement on Sunday. If the situation does not improve in the short term, it will be forced to further trim jobs and shut stores, it added.
"The landlords have been telling us that they are facing difficulties in offering rent reduction, but I hope that we could face this challenging time in partnership," said Bankee Kwan Pak-hoo, chairman and CEO of Hong Kong-listed Celestial Asia Securities Holdings, which owns Pricerite. "It is an uphill battle. Do we really want to see Hong Kong's unemployment rate continue worsening?"
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Pricerite currently operates 27 stores and employs 800 full-time and part-time staff, Kwan said.
Pricerite's announcement highlights the plight of Hong Kong's embattled retailers after the social unrest sent the local economy into a recession for the first time since the global financial crisis in 2009. The outbreak, now called Covid-19, has so far prompted jewellery retailer Chow Tai Fook, cosmetics retailer Sa Sa International and restaurant operator Tsui Wah Holdings to cut staff or close stores this year.
Hong Kong landlords fulfil 'social responsibilities', cut rents in response to government call
The coronavirus outbreak that started in Wuhan, in the central province of Hubei, has so far claimed 1,669 lives and infected more than 69,000 people worldwide in about two dozen countries, though most of the casualties are in mainland China. Many countries have imposed border controls and quarantine measures, while global airlines have suspended flights to China.
Starved of the mainland tourist dollars, retail sales slumped 24.1 per cent last quarter, the worst on record, according to government data, while the economy shrank 2.5 per cent at the same time. Financial Secretary Paul Chan Mo-po has said more job losses could follow a deeper recession this year.
Apart from closing stores and cutting jobs, Pricerite said it has paused hiring and asked back-office workers to take four months of unpaid leave through May. The company has also cut the salaries of senior management by 20 per cent and executive directors by 40 per cent through June.
"The group's cost reduction initiatives have now gone beyond measures taken during the Sars (severe acute respiratory syndrome) outbreak in 2003," the company said. "We will continue to discuss with our landlords on the reduction of leases in the hope that owners will be more responsive to the retailers' operating conditions and share the hard times with us."
Some of Hong Kong's biggest landlords and lenders have responded to the government's call to help the city's local businesses. Sun Hung Kai Properties, Henderson Land, LKF Group and New World Development have agreed to lower rents in February for their retail tenants, while HSBC and other lenders have eased loan repayment terms, among others.
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