Beauty chain Sa Sa’s profit soars as mainland Chinese tourists return to shop in Hong Kong

The company said it is cautious about opening new stores, however, as the retail environment remains challenging in the absence of supportive government policies

Hong Kong economy

Salina Li

Published: 7:34pm, 20 Jun 2024

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Hong Kong beauty products retailer Sa Sa International saw its profit jump almost fourfold in the last financial year as the number of mainland Chinese tourists returning to shop in the city continued to rise.

The company said on Thursday it is cautious about opening new stores in the city, however, as the retail environment remains challenging in the absence of supportive government policies.

The cosmetics chain reported a gain of 276 per cent in earnings to HK$218.9 million (US$28 million) for the end year ended March 31.

The return of mainland tourists helped drive Sa Sa’s turnover up by 25 per cent to HK$4.37 billion, with sales in Hong Kong and Macau increasing by 35 per cent to HK$3.21 billion, according to the company’s latest annual report.

It proposed a final dividend for the year of 5 HK cents per share, representing about 70 per cent of the profit for the year. No dividend was paid in 2023.

03:39

Shop occupancy recovers in Hong Kong, but vacant stores still visible across the city

Sa Sa’s share price jumped 7.9 per cent to HK$0.82 at Thursday’s close.

Hong Kong welcomed nearly 3.4 million tourists in May, up 20 percent year on year, according to the Tourism Board. Most of them – 2.63 million – came from the mainland, a 15 per cent increase from the same month a year ago.

The average Hongkonger spent between HK$230 and HK$250 each time they shopped in Sa Sa, while the typical Chinese tourist splashed out about HK$420, according to Simon Kwok Siu-ming, chairman and chief executive of Sa Sa International Holdings.

“Following the resumption of cross-boundary travel between Hong Kong, Macau and mainland China in January 2023, the return of tourists triggered revenge spending, which drove business growth,” he said.

Despite this, the cosmetics vendor’s overall approach to store expansion will be prudent and will accelerate only when policies favourable to the sector are introduced, Kwok added.

“We don’t have a store-opening target this year and we have to assess whether the retail market is improving,” he said.

Kwok said if the mainland and Hong Kong governments could agree to introduce measures such as multiple-entry permits for residents of the Greater Bay Area and increase the duty-free allowance for tourists, it would be a big help to the city’s retail market.

Sa Sa had 82 shops in Hong Kong and Macau as of March 31, of which 26 were located in what it called core tourist areas, according to its filings to the Hong Kong stock exchange. The latter number was down from 45 before the pandemic forced Sa Sa and many other vendors to close outlets. It now has 183 retail outlets across all regions.

The company has opened five new shops this year in Hong Kong, two in Tsim Sha Tsui, one in Central, and two in new shopping malls in Tai Wai and Wong Chuk Hang to capitalise on the return of tourists, it said. It closed two shops, in Sheung Shui and Lok Ma Chau.

The group said it will actively explore and develop its presence in Southeast Asian countries such as the Philippines.

Kwok said even though it has stepped up its efforts to expand into the Southeast Asian market and invested in the development of its online business in mainland China, Hong Kong still remains Sa Sa’s core market.