- Revenue grew 7% at Wharf ‘despite a challenging market’
- Company declared an interim dividend of 58 Hong Kong cents
Wharf Holdings Ltd., Hong Kong’s largest mall operator, said first-half profit fell 3.3 percent as weak retail sales limited the company’s ability to charge its tenants higher rents.
Net income in the six months to June 30 fell to HK$6.75 billion ($867 million), or HK$2.22 per share, from HK$6.96 billion, or HK$2.3 per share a year earlier, according to a Hong Kong Stock Exchange statement on Wednesday.
Wharf is the first major mall developer to release earnings for the first half, when Hong Kong retail sales dropped 10.1 percent due to economic uncertainty and a sharp decline in tourist spending. That has led malls including Wharf’s landmark Harbour City in Kowloon to change their mix of tenants and include more concept stores to appeal to a wider range of consumers.
Wharf shares fell 1.9 percent on Wednesday. They have advanced 21 percent this year, compared with the 12 percent increase in the Hang Seng Properties Index.
The company said revenue for the first six months grew 6.6 percent to HK$7.64 billion, compared with HK$7.17 billion in the same period of 2015, despite what Wharf called a “challenging market,” according to the statement. The company proposed a first interim dividend of 58 Hong Kong cents per share.
Revenue from retail tenants at the Harbour City mall increased 4 percent to HK$3.1 billion, despite a decline in tenants’ sales of 14.7 percent to HK$13.3 billion. Mall revenues are a mixture of fixed rents and a percentage of retail sales. Harbour City accounted for more than 48 percent of sales from Wharf’s Hong Kong investment properties, which also include the Times Square mall in Causeway Bay.
While the company declined to provide sales forecasts for the second half, Vice Chairman Doreen Lee said at a press conference there were signs of a recovery in luxury sales at its malls.
“July luxury sales were better than expected” and “had bottomed out in June,” she said.
Lee said the company doesn’t lower rents for existing tenants, though it will be more flexible when signing with new tenants as part of adjusting its retail mix.