The worst should be over
- Overall Hong Kong retail sales fell 13.8% in Mar 22
- Retail sales performance in Mar 22 was above that of Mar 20, despite more severe pandemic situation
- Gradual easing of social distancing measures should bode well for retail market recovery
As the fifth wave of the pandemic continued to dampen retail sentiment, overall retail sales value in Hong Kong plunged 13.8% to HK$23.8bn in Mar 22, after a 14.6% decline in Feb 22. This brought Hong Kong’s overall retail sales value to HK$82.9bn in 1Q22, down 7.6% y-o-y.
Fashion and jewellery/watches were amongst the hardest hit trades, with their sales receipts tumbling 41.5% and 36.8% respectively in Mar 22. Retail sales values of department store items and consumer-durable goods also fell by 16.9% and 9.8% respectively in the same month. In 1Q22, discretionary items registered a 12.6-23.6% sales decline y-o-y. On the other hand, supermarket items continued to outperform based on a strong groceries demand led by stringent dining restrictions. In Mar 22, the supermarket sales value grew 2.6%, bringing a 6.5% increase in 1Q22.
The lingering pandemic situation has further grown consumer reliance on online shopping. Online retail sales rose 30.9% in Mar 22. This brought 1Q22 online retail sales up 36.3% to HK$8.6bn, which represented 10.4% of total retail sales, up from 2021’s 8.1%.
While the fifth wave of the pandemic appeared to be the most severe, overall retail sales value in Mar 22 was 3.6% higher than that of Mar 20. This illustrated that retailers have become more flexible on their business operations in order to cope with the challenges brought on by the pandemic. Hence, we believe the new round of rental concessions offered by landlords in 2022 should be fewer compared to 2020.
The recent years of COVID experience has also lifted the public’s fear of resuming social activities. This has encouraged consumers’ swift return as soon as the pandemic situation started to improve. The retail scene in Hong Kong showed signs of noticeable improvement in Apr 22, with the number of COVID cases peaking in Mar 22. The distribution of the first batch of electronic consumer vouchers, which amounted to HK$5,000 for each eligible citizen, should further bolster retail sales performance in Apr 22. Since late Apr 22, the government has progressively eased social distancing measures, which include reopening fitness centres and beauty parlours, extending catering business hours to 10pm, and increasing restaurants’ maximum dining capacity. Against this backdrop, we expect retail sales to resume growth in Apr 22. The further relaxation of social distancing measures in May 22 along with the distribution of a second batch of electronic consumption vouchers should bode well for domestic consumption recovery. This should benefit retail landlords. However, a fully-fledged retail market recovery still hinges on the border with China reopening.