Forget LVMH, LFX is the new king on the block
Just when Louis Vuitton is contracting, we have Lao Feng Xiang (LFX) expanding.
Despite the sluggish domestic retail market, which moved the world’s largest luxury retailer to question how businesses can pay expensive rent without high-spending mainland tourists, China’s No. 1 gold jewelry shop is determined to raise its market share in Hong Kong.
Lao Feng Xiang is opening a mega store in Nathan Road, Mong Kok’s golden street, for which it’s paying HK$2.1 million a month in rental costs.
That’s 10 percent lower than the HK$2.3 million rent by Luk Fook Jewellery, the previous tenant.
It will be the third store for the Shanghai-listed jeweler which only started expanding in Hong Kong this year.
Lao Feng Xiang leased a Haiphong Road shop in March and three stories of a Mong Kok landmark between Argyle Street and Sai Yeung Choi Street.
The timing of the expansion is most interesting.
Not only does it fall on a stretch of multi-year lows for gold prices, causing misery to many Chinese damas, but also comes as a cold spell is washing over the traditional peak season for retail sales.
LVMH recorded a 10 per cent slump in Hong Kong as the group tried to renegotiate rents after bargain-hunting Chinese tourists began skipping Hong Kong for Europe or Japan, taking advantage of a strong US dollar.
(Gucci is reported to be in talks for lower rent.)
Last week, LVMH subsidiary TAG Heuer, a Swiss watchmaker, confirmed it is closing its Causeway Bay store due to high rent.
It’s understandable why Lao Feng Xiang should want to expand when everyone else is cutting back.
According its website, the company was ranked 16th in Deloitte’s Global Power of Luxury Goods listing last year, just behind Prada.
With more than 1,000 outlets and 300 franchised shops, Lao Feng Xiang reported sales of 32.8 billion yuan (US$5.28 billion) last year compared with 30.64 billion euros (US$33.25 billion) for LVMH, the undisputed leader.
Lao Feng Xiang launched its expansion plan in 2012 with the opening of a retail store in New York’s Fifth Avenue and another in Sydney.
That year, it began selling jade and other jewelry in Hong Kong powered by a HK$30 million war chest.
Just like many Chinese companies, Lao Feng Xiang is making a global push amid a slowdown in domestic markets.
The payoff can be huge, but first, it has to weather the current lackluster retail environment.
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