Profit drop
Over this period, despite the perfumery retailer’s growth in transaction volume rising by 2.9%, its average spend lowered by 2.8%.
The cosmetic retailer's turnover also decreased by 0.6% to HK$7.75 bn (€883 mn) and its profit fell by 14.8% to HK $326.7 mn (€37.2 mn) in the year ending in March.
Stalling sales in Hong Kong and Macau, which comprise 80% of the company’s total retail figures, contributed greatly to the drop, with mainland numbers also falling by 4%.
THAAD impact
Upon releasing its annual results, Simon Kwok Siu-ming, Chairman, Sa Sa, announced to the press:"The THAAD (Terminal High Altitude Area Defense) missiles have affected the sales of our key growth driver — Korean products."
Large multinational organisations and small domestic start-ups are both expected to move outside of their Chinese and Korean marketplaces to neighbouring Asia-Pacific (APAC) and global regions.
The move is expected to come as brands aim to overcome the detrimental effect that political tensions between China and Korea are having on cosmetics sales.
The impact of THAAD has led Sa Sa International to review its strategy. Strict Chinese border controls pushed brands into setting its price at the mass-market consumer market.
To date, approximately 21% of the company’s products come from South Korea, over double the number of items that came from the K-beauty hub last year.
New strategy
However, to overcome slowing trade in China, the company will now target Taiwan and Japan with a budget cosmetics collection. The direction seeks to encourage retail sales and brand awareness in these new geographic markets.
"If you asked me in May, I'd expect a rebound in retail sales in Hong Kong. Now, the market is at most stabilising but with the recovery slowing," announced Kwok.