Sa Sa in rent discussions with landlords, eyeing staff cuts

Hong Kong beauty retailer Sa Sa is in discussion with landlords over rent reductions and will reduce staff as it tries to address falling sales.

In a profit warning, Sa Sa chairman and CEO Simon Kwok said August was its weakest month, with sales down by 32 per cent in Hong Kong and Macau. That was the month when more than 1000 flights were cancelled after protestors crowded Hong Kong International Airport. Subsequent international publicity led to many inbound travellers cancelling their flights, resulting in 851,000 fewer passengers passing through the airport during August. 

Kwok said the group’s sales performance remained “very weak” in September with turnover from September 1 to 15 down by about 14 per cent month on month, and by 29 per cent on a year-on-year basis. 

Sales in Hong Kong for the five months to August 31 declined by about 15 per cent and in Macau by 17 per cent.

Kwok said that while the group has sufficient cash on hand to meet current business needs at this point, it was adopting a prudent finance management approach with proactive implementation of a number of cost-control initiatives, including negotiating for rental reduction with landlords. 

Other measures include reducing operational expenses such as staffing and general administration overheads. 

“The group has also been launching more promotional campaigns with attractive discounts to boost sales and lower the inventory level to reduce holding costs and preserve cash,” he said in the profit warning. 

“At the same time, the group continues to review market conditions and close down low-efficiency stores to optimise the store network and adjust product mix and promotion strategies to stimulate sales.”

The group is preparing to launch a WeChat mini-program to enable frontline salespersons to continuously interact with customers and sell products via the online platform without the need for the customers to visit physical stores. 

In the six months to September last year, Sa Sa reported a profit of HK$202.9 million. This year’s interim results will be released on November 30.

“The group believes that its agility will retain its core competency, lead the group through this difficult time and lay a solid foundation for the development of new retail model in the future,” Kwok said.

The protests, now into the 16th week, did not get all the blame for the declining sales. 

“The main reason for the group’s performance decline is the weak sales performance in its core markets in Hong Kong,” he said. “The sales performance was hit by the decline of visitor arrivals from Mainland China to Hong Kong, as well as weaker consumer sentiment, caused by continuous social incidents in Hong Kong, increasing tension of Sino-US trade war and the Renminbi depreciation.”

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