Macau gaming statistics surge; Hong Kong retail sales pick up

CHINA. Positive gaming statistics from Macau and a surprise rebound in Hong Kong retail sales have come as welcome news to DFS and other travel retailers in both locations.

According to Hong Kong’s Census and Statistics Department, retail sales rose +3.1% year-on-year in March to HK$35.7 billion (US$4.6 billion), following a -3.2% decline for the first two months of 2017. The figures include Hong Kong International Airport and other pure ‘travel retail’ locations and are traditionally seen as a key indicator by companies such as DFS Group.

After netting out the effect of price changes over the same period, retail sales in March rose by +2.7%, the first such rise since July 2015.

Importantly from a luxury goods and travel retail perspective, sales of jewellery, watches & clocks, and valuable gifts increased by + 8.4%. Department store sales edged ahead by +0.1% in the first quarter. Sales of other items popular with Mainland Chinese tourists, such as cosmetics and medicine, climbed +3.5% in March.

Click on table to enlarge

The +3.1% result compared with a median estimate for a -0.9% decline projected by economists in a Bloomberg survey. While the recovery was modest, it still comes as welcome news to Hong Kong retailers, especially as Mainland Chinese arrivals to Hong Kong surged by +10.4% year-on-year in March, the biggest monthly rise since February 2015. That result has been widely attributed to Chinese travellers choosing alternative destinations to South Korea, which is currently at loggerheads with China over the THAAD anti-missile system deployment in the country.

Timing is everything in the airport tender world. Hong Kong International Airport’s successful bidders for the the liquor/tobacco/gourmet (CDF-Lagardère, pictured above) and beauty & acccessories (Shilla Travel Retail) will be monitoring the latest retail results carefully. Both retailers will take up their contracts at the end of 2017. Do the latest numbers indicate the beginning of a sustained recovery from the slump that has so affected incumbent retailer DFS Group’s tenure?

The news from Macau though was much more positive. Casino revenue rose for a ninth straight month in April, surging by +16.3% to US$2.52 billion following a +18.0% gain in March. DFS, which dominates the luxury and beauty market in Macau, has particularly benefited from the trend.

Macau gaming revenue surged in April, maintaining a seemingly sustained recovery from two years in the doldrums (click to enlarge table)
(Above and below) In February DFS Group unveiled the final phase of T Galleria by DFS, City of Dreams in Macau, marking the culmination of a year-long expansion. The investment looks to have been well-timed judging by the encouraging gaming trend in early 2017.

 

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