Hong-Kong-based beauty retailer Sa Sa’s retail and wholesale turnover fell 56.5% to HK$892.4m (US$115m) in the fourth quarter, from January 1 to March 31, compared to the same period last year.
In Hong Kong and Macau, retail and wholesale turnover fell 62% year-on-year to HK$657.6m (US$84.76m), while same-store sales dropped 59.6% compared to the same period the year prior.
Sa Sa attributes the decline to an 80.8% decrease in the number of transactions of mainland Chinese tourists.
The number of local customers increased 41.4%, although the overall transaction volume fell 43.4%. The average sales per transaction of local customers dropped by 19.9%, with that of mainland tourists rising 2.8%.
While the basket size of local customers is smaller, their transaction volume mix has had a significant impact, resulting in an overall 34.6% drop in overall basket size.
The company’s retail and wholesale turnover in other markets outside Hong Kong and Macau, including mainland China, Singapore, Malaysia and e-commerce, decreased 27% in the fourth quarter, mainly due to the COVID-19 pandemic.
Retail sales in mainland China and Malaysia dropped 51% and 16.9%. Sa Sa attributes the drop to the store closures, from beginning of February in Mainland China and mid-March in Malaysia.
Sa Sa’s e-commerce business was affected in early and mid-February as logistics services in mainland China were impacted by the pandemic.
Both Hong Kong and Macau implemented border controls due to COVID-19, resulting in a sharp decline in the transaction volume of mainland tourists in the fourth quarter.
Due to the two-week shutdown of casinos in Macau and falling business demand, some shops have been temporarily closed while others have been operating on shortened hours since late January. While the move lowered the company’s operating cost, it also contributed to the sales decline.
Sa Sa says that in light of the “persistent severe operating environment,” the retailer will continue to implement cost reduction strategies.
In the second half of the financial year, Sa Sa closed nine stores to save on rent. The retailer will continue downsizing locations in Hong Kong =and request short-term rental concessions from landlords where leases are yet to expire.
In addition, the company reduced non-essential expenses across all departments, streamlined its organization and implemented short-term measures such as reducing salaries and adopting the scheme of unpaid leave to reduce operating costs.
Sa Sa chairman and ceo Simon Kwok said: “Local customers now account for the majority of the group’s revenue, the group will continue to adjust its product mix to meet their demand for protective and pandemic related products and other beauty products. The group will continue to strictly control the inventory level by eliminating products with unsatisfactory sales performance and reducing those with excess inventory. This would help preserve cash and reduce the risk of product expiry. Since late last year, the group has further reduced inventory levels, and has adequate cash to meet its current business needs.”