HONG KONG — As this city heads into its fourth day of widespread pro-democracy protests, retailers are bracing for what’s likely to be a disappointing Golden Week in terms of sales.
What should usually be one of the biggest shopping weeks of the year has been overshadowed by civil unrest. University and secondary-school students, joined by the Occupy Central movement, have taken over Hong Kong’s main business districts, disrupting traffic and business. With major thoroughfares cordoned off, commuters have had to deal with heavy traffic delays every morning. More than 200 bus routes have been rerouted or suspended and various elementary and secondary schools around the city have been closed.
Stores are staying open despite the disruption but it’s not quite business as usual. On Tuesday afternoon, students sat peacefully on the street in front of Sogo department store, near Forever 21, Apple, Chow Tai Fook, Swarovski and countless luxury boutiques. Sogo and other stores remained open, but foot traffic appeared much lighter than usual as transportation around the usually hyperefficient city slowed to a crawl.
At a press conference Tuesday, Hong Kong chief executive CY Leung said that the Occupy Central movement could “last for quite a long period of time” but didn’t give any insight into how the government might deal with the protesters. For now, the government has called off the Chinese National Day fireworks show today.
Demonstrators are demanding democracy in a series of protests that will culminate in a blockade of the financial district today, the start of China’s long holiday.
“Tourism and retail, which make up 10 percent of Hong Kong’s GDP, would be badly affected if tourists stay away. Business confidence would also take a dive,” Capital Economics said in a note Monday. The economy, which is already very weak, could easily be pushed into recession if the protests drag on, it said.
In a note published late Monday, Luca Solca, managing director and sector head of global luxury goods at Exane BNP Paribas, said luxury companies are highly exposed to Hong Kong, and that further escalation of the current turmoil brings more downside to the sector, against a backdrop of slowing sales.
“Luxury goods players depend very significantly from sales in Hong Kong. Major megabrands like Gucci have 10 percent of global sales there, and Compagnie Financière Richemont said they have 17 percent of sales in Hong Kong.”
Solca wrote that a scenario of further deterioration of social and political tensions in Hong Kong would usher more downside to the sector. “We should go back to 2003 SARS operating deleverage and multiple compression to fully grasp the potential deterioration,” he suggested.
The Hang Seng index closed down 1.28 percent Tuesday, following on a 1.9 percent decline on Monday.