Hong Kong owner of Times Square projects cloudy outlook as pandemic lingers, Louis Vuitton and luxury retailers desert malls

Company says underlying full-year net profit for 2020 decreased by 23.6 per cent to HK$7.48 billion
Group is not alone in dealing with decline in retail and hotels market, ‘but rather it is a problem that the city is facing’, chairman says

Hong Kong property

Pearl LiuandPeggy Sito

Published: 7:30am, 5 Mar 2021

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Wharf REIC, which owns Hong Kong luxury shopping centres Times Square and Harbour City, has projected a cloudy outlook for 2021, saying that the Covid-19 pandemic might continue to drag on its retail and hotel operations this year.

The company on Thursday reported a 23.6 per cent slide in 2020 net profit to HK$7.48 billion (US$963.8 million), along with a net investment properties revaluation deficit of HK$13.77 billion.

“It is cloudy and rainy in 2021,” chairman and managing director Stephen Ng Tin-hoi said during an online media briefing on its financial report, referring to its business outlook. “I do not dare to say that heavy rain will not be back.”

The pandemic has devastated the company’s businesses. Visitor arrivals in Hong Kong have dropped to a trickle since February last year, while retail sales have continued to decline, notably by 13.6 per cent year on year in January, amid a resurgence of coronavirus cases.

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Profits at Wharf REIC’s investment properties fell by 23 per cent, and its hotels division recorded an unprecedented operating loss amid a historic slump in Hong Kong’s tourism industry.

The latest report card follows on the heels of news that Louis Vuitton and Fendi had shut their shops in Times Square. Ng declined to disclose more details about the exits, but said the company was not alone in facing the departure of high-end retailers in the city.

“Most luxury brands have changed their views about Hong Kong within these two years,” Ng added. “They have cut their investments in the city, as compared to the mainland, and this is the trend.”

Hong Kong’s economy shrank by a record 6.1 per cent in 2020, shattered by social unrest and the Covid-19 pandemic, prompting the city’s government to spend an unprecedented amount of its fiscal reserves to help restore growth and preserve jobs.

Wharf REIC’s retail tenants had shortened their operating hours and stepped up pandemic containment measures to support Social distancing, it added in its results announcement.

“It is a problem that the city is facing, and should be solved by the Financial Secretary or the Chief Executive,” he said. “It is still tough for our hotels business so far this year, as every month there are only some travellers and, after all, local clients are limited. Local people cannot do staycations every week,” Ng added.

With the recent easing of Social distancing measures and the roll-out of vaccines, retail sales might rebound in the Coming months, Goldman Sachs said in a research report recently.

“We see that some of our tenants have some confidence in Hong Kong. It is definitely not the best time, but tomorrow might be better,” Ng said.