Sluggish Luxury Goods Purchases Further Evidence of China Slowdown—Looking to U.S. for Growth?

Purchases of luxury goods in Hong Kong by tourists from the mainland have, by all accounts, been disappointing during this week's Golden Week holidays. “Purchase of luxury goods by mainland visitors in Hong Kong is set to fall at least 10 percent from a year ago during this week's holiday, said Joseph Tung, executive director of the Travel Industry Council,” cited by Bloomberg “The decline comes even as the number of tourists coming from China increases.” The number of tourists arriving in Hong Kong from the mainland during the first three days of Golden Week were up by 6 percent but reports from Hong Kong government officials and interviews with local retailers indicate that spending per tourist has declined, continuing a trend that started earlier this year. Tung is cited by Bloomberg as saying that average spending per tourist is expected to be HK$5,000 (US$645) to HK$6,000 (US$774) during this year's Golden Week compared to an average of HK$7,000 (US$903) to HK$8,000 (US$1,032) last year. “Golden Week sales this year so far are more or less the same as last year,” Joseph Chu, an executive director of Prince Jewellery & Watch which runs 13 stores in Hong Kong told Bloomberg. “The number of mainland shoppers didn't decrease but the average spending of each visitor has dropped.” There was an early indication of trouble in the China luxury goods market when Burberry Group plc BURBY announced on September 11 that sales of its high-end apparel in China were slower than anticipated. Patrizio Bertelli, CEO of Italian fashion house Prada PRDSY reacted to investor nervousness over the Burberry comments by saying on a conference call quoted by Reuters, “I think we must stay calm and be less hysterical. I don't see such a dramatic market” and that he expects “good double-digit growth” this year. Several U.S. luxury brands have retail outlets in Hong Kong including Harry Winston Diamond Corporation HWD, which has one store inside Hong Kong's Peninsula Hotel, Coach COH, which operates 20 retail outlets in Hong Kong, Kowloon and Lantau, and Tiffany & Co. TIF, which has eight shops in Hong Kong and Kowloon. None of these companies have yet commented on Golden Week sales in Hong Kong. Other US luxury goods retailers are looking to tap the Chinese market through online retailing. Closely held Neiman Marcus has invested $29.4 million in a Hong Kong-based ecommerce company, Glamour Sales, according to but after anticipating a December 2012 launch, the Dallas Morning News reports that the launch of online sales in China has been delayed until July 2013. The slowdown of luxury goods sales in China may have an impact on the US equity market. Colin Welch, chief executive of Financo Europe, wrote for Market News and Data brought to you by Benzinga APIs

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.