(Bloomberg) -- Luxury-watch retailer Halewinner will almost double its store count in the Chinese gambling hub of Macau, where casinos want time to be irrelevant, dealing another blow to Hong Kong’s staggering retail market.
Halewinner Watches Group will open at least nine more shops in Macau while closing two in Hong Kong, Chairman Karson Choi said in an interview. Most of the new stores will be in the Cotai Strip, where Sands China Ltd. will open its Parisian resort this year and Wynn Macau Ltd. will debut the Wynn Palace.
“This year we’re still going ahead with our major expansion plan,” said Choi, son of billionaire Francis Choi. “That plan is in Macau.”
The peninsula, home to the world’s biggest gambling center, is trying to diversify its image by welcoming luxury-brand shoppers. That effort is helping siphon big spenders from Hong Kong, where the number of visitors from China dropped for nine straight months and retail sales in February plunged the most in 17 years.
The outlook isn’t any better for next week’s Labor Day holiday, with the Hong Kong Travel Industry Council estimating the number of package-tour travelers will drop by 50 percent. The tour-group visitor count, which mostly consists of Chinese tourists from the mainland, plunged 60 percent in the first quarter from a year before.
“We don’t see any recovery signs in the upcoming Labor Day holiday,” said Joseph Tung, the council’s executive director.
The gloom engulfed even Apple Inc., with sales for Greater China plunging 26 percent in the quarter ending March 30.
“The vast majority of the weakness in the Greater China region sits in Hong Kong,” Chief Executive Officer Tim Cook said during an April 26 call with analysts. One reason he cited is the local currency’s peg to the stronger U.S. dollar. “That has driven tourism, international shopping, and trading down significantly compared to what it was in the year ago,” Cook said.
Luxury handbag and fashion retailers also are taking hits in the city. Burberry Group PLC sales in Hong Kong fell more than 20 percent for a third straight quarter, and the company is seeking to reduce its local rent payments.
Prada SpA, which held Hong Kong’s biggest initial public offering in 2011, reported sales in Asia fell 16 percent last year.
“The near-term outlook for retail sales will still be constrained by the weak inbound tourism performance and uncertain economic prospects,” the Hong Kong government said after retail statistics were released in late March.
Choi’s father is billionaire Francis Choi, whose Early Light Industrial Co. Ltd. makes toys for more than 30 brands, including Mattel, Hasbro, Disney and Wow Wee. Early Light also owns properties in Hong Kong and is moving into consumer electronics and medical products to help increase profit margins, the younger Choi, 30, said.
Halewinner outlets sell watches from more than 40 brands, including a $200,000 Jaeger-LeCoultre and a $180,000 Blancpain. During an April 20 interview at a Halewinner outlet in Causeway Bay, Hong Kong’s premier retail district, Choi wore a steel Audemars Piguet Royal Oak timepiece priced at $21,000.
The family acquired the watch retailer in 2010, when it had just seven stores. Now it has more than 30 outlets in Hong Kong, Macau and mainland China.
Sales at its Hong Kong stores dropped 30 percent last year amid China’s economic slowdown, a government anti-corruption campaign and protests by Hong Kong residents claiming the city caters to wealthy mainland visitors at their expense.
Zhou Guoliang, 54, a general manager from Shanghai, said he was more hesitant about coming to Hong Kong with his wife because of the social tensions, so he was taking his money to Macau.
“I heard Hong Kong people insult Chinese,” said Zhou, who once bought a $7,000 watch with his winnings. “We come to bring consumption, and you should be nice and guide visitors.”
Swiss watch exports to Hong Kong in March fell 38 percent from a year ago, the most among major markets, according to the Federation of the Swiss Watch Industry.
Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewelry chain, and Sa Sa International Holdings Ltd. reported slumping sales during the Lunar New Year holiday in February, when the number of mainland Chinese tourists to Hong Kong dropped by 26 percent from a year earlier.
China’s economic slowdown and anti-corruption efforts also affect Macau and its $30 billion casino industry, yet there are signs the market has hit bottom. Visitor totals for the former Portuguese colony rose 4.2 percent last month, and a flood of new projects like the Batman Ride targets tourists and families.
“Retailers are still willing to expand in Macau because Chinese visitors will continue to come and play in the gaming hub,” said Michael Cheng, Asia Pacific & Hong Kong/China retail & consumer partner at PricewaterhouseCoopers LLP.
Halewinner’s 15 shops in Macau experienced a downturn last year, though he remains bullish because “the situation improved” by the fourth quarter and the city is the only one in China with gambling.
The company plans to have more than 20 shops there by year’s end and is trying different methods to engage with customers -- even hosting parties with wine and cigars to show new watches.
“Buying things is one of the things you do when you go on a vacation,” Choi said. “They buy because they won some money or because they lost some money. A lot of customers lost some money and come to buy a product so they feel better.”
To contact the reporters on this story: Daniela Wei in Hong Kong at firstname.lastname@example.org, Jill Mao in Hong Kong at email@example.com. To contact the editors responsible for this story: K. Oanh Ha at firstname.lastname@example.org, Daryl Loo at email@example.com, Michael Tighe
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