Sogo owner Lifestyle International reports first loss since 2004 after investment slump dragged down sales, revenue increases last year
Lifestyle International Holdings, which owns and operates Hong Kong's Sogo department stores, reported a record loss of HK$1.3 billion (US$166 million) for 2021 on Friday, and said it was likely to face an even tougher year ahead as the city struggled to contain an Omicron-fuelled fifth wave of the coronavirus pandemic.
The loss was the company's first ever since it started reporting its financial performance in 2004. Its total sales rose 9.9 per cent to HK$6.2 billion, while revenue jumped 14.9 per cent to HK$2.3 billion. Income from other investments, however, dragged down the retailer's profit.
"The net loss this year was caused by the significant amount of net investment loss being recorded, which was largely a result of the unrealised fair value loss on the group's holdings of certain equity and debt securities," the company said in a statement. "Adjusted net profit attributable to the group's core retail operations increased 7 per cent to HK$857.1 million from HK$801.2 million in 2020, primarily as a result of sales growth."
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In 2020, Lifestyle International reported a profit of HK$138.5 million despite the absence of mainland Chinese tourists, as Hong Kong closed its borders to stem the spread of Covid-19. The operator of the upscale department stores in Causeway Bay and Tsim Sha Tsui was, however, unlikely to see its fortunes improve vastly this year, with Hong Kong imposing its toughest social distancing curbs yet since the pandemic began in early 2020.
The Sogo store in Tsim Sha Tsui. Photo: Linda Lew alt=The Sogo store in Tsim Sha Tsui. Photo: Linda Lew>
Hong Kong has since January been grappling with the spread of the more infectious Omicron strain, which has led to new stay-at-home orders and dining bans, dampening consumer spending. On Thursday, Hong Kong logged a record 56,827 new Covid-19 cases. On Friday, it recorded another 52,523 cases.
"Looking ahead, with strict border controls remaining enforced, we foresee 2022 would be a much tougher and uncertain year for both the retailing industry and the economy of Hong Kong," said Kam Shim Lau, Lifestyle International's executive director.
The Sogo store in Causeway Bay had to shut for two days after two employees tested positive for Covid-19 in February. Photo: Felix Wong alt=The Sogo store in Causeway Bay had to shut for two days after two employees tested positive for Covid-19 in February. Photo: Felix Wong>
Last year, Hong Kong's retail sales recovered and rose for an 11th month in December, according to government statistics. They rose 8.1 per cent to HK$353 billion or just under HK$30 billion a month on average. A 20 to 30 per cent fall in retail sales was expected during the current outbreak, analysts said.
In February, the Sogo store in Causeway Bay had to shut for two days after two employees tested positive for Covid-19.
"Should the Covid-19 resurgence persist for a long period, the local retail market will face a further downturn this year. Under current circumstances, the chances of a border reopening within the first half of 2022 are slim. Even with the reopening of borders, taking into account the significant changes in global economic dynamics and a permanently altered retail landscape, a recovery of Hong Kong's retail industry back to pre-pandemic levels remains elusive," Lau said.
Lifestyle International's shares closed the trading week 2.2 per cent lower at HK$4.36 apiece on Friday.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.
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