Hong Kong mall owner Wharf Reic looks to stimulate spending with promotions after posting flat profit

Harbour City and Times Square owner’s full-year 2023 profit fell 3 per cent to US$767.3 million even as revenue jumped 7 per cent
The company said it hopes to navigate and overcome headwinds through promotional activities with the Hong Kong government

Hong Kong property

Cheryl Arcibal

Published: 5:33pm, 7 Mar 2024

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Wharf Reic, the owner of Harbour City and Times Square malls, said it would undertake promotional activities to get residents and tourists to loosen their purse strings after recording a slightly lower profit last year.

Net profit slipped 3 per cent to just over HK$6 billion (US$767.3 million) despite a 7 per cent jump in revenue to HK$13.3 billion.

The company’s net debt fell to HK$36.3 billion, the lowest since its listing in 2017.

“The group shall enhance tenant offerings and promotional activities in collaboration with the government’s campaigns to stimulate tourists’ and locals’ spending amid competition,” Wharf Reic said in a filing to the Hong Kong stock exchange on Thursday. “Through the joint efforts, Hong Kong will navigate and overcome the present headwinds together.”

Shoppers seen entering Times Square in Causeway Bay. Photo: Elson LI

The city’s retail segment is unlikely to see significant upside this year, with the Hong Kong Tourism Board forecasting 46 million people will visit the city, a 35 per cent increase from last year, but just 70 per cent of the 65 million in 2018. Meanwhile, estimated spending per overnight visitor is expected to shrink by as much as 16.4 per cent to HK$5,800 this year from HK$6,939 in 2023.

Wharf Reic said although positive signs such as potential interest-rate cuts and the expansion of a scheme that allows more individuals from mainland China to visit Hong Kong could help the retail segment, volatility could also arise from a global economic slowdown, geopolitical tensions and the US presidential election.

“Furthermore, evolving consumption behaviours and increasing regional competition are impacting the retail and hotel recovery path, while the office sector grapples with weak demand and a flight-to-quality trend,” it said.

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Harbour City delivered a 10 per cent increase in overall revenue as luxury brands Gucci and Celine expanded their space in the shopping centre, while De Beers, Fendi and Van Cleef & Arpels launched new flagship stores facing Canton Road, one of the city’s most popular shopping streets.

The office occupancy rate stood at 88 per cent as of end-2023, with revenue declining by 6 per cent, the company said.

Meanwhile, overall revenue achieved by Times Square fell 3 per cent. The mall saw new tenants such as Franck Muller and Girard Perregaux, while the likes of Polo Ralph Lauren, Fila and Tommy Hilfiger expanded their retail space.

The occupancy of its office space stood at 88 per cent, resulting in a 14 per cent decline in revenue.

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“The lifting of the border restrictions in early 2023 stimulated the gradual recovery of Hong Kong’s tourism and retail sectors,” Wharf said. While the pace of recovery fell short of market expectations, retail rents had stabilised and were positioned to improve as sales recover further, it added.

Office occupancy and rent remained under pressure from oversupply and weak demand, Wharf said.

The company declared a second interim dividend of HK$0.61 per share, which will be paid on April 23. Its shares closed 5.2 per cent higher, compared with a 1.3 per cent decline in the broader market on Thursday.

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