Hong Kong cosmetics chain Sa Sa's profit slumps on China tourist slowdown

Hong Kong skin care and cosmetics retailer Sa Sa International Holdings Ltd said on Tuesday its half-year net profit plunged 55 percent as a drop in mainland tourists to the city and a stronger currency hit consumer sentiment.

Sa Sa had warned in October it expected half-year profit to drop by more than 50 percent due to a worsening operating environment.

The strong Hong Kong dollar - which is pegged to the U.S. dollar - has made the city an expensive destination. China's wealthiest tourists are also now heading to more exotic destinations.

Hong Kong's comparatively high rents and wages have hurt companies as fewer mainland Chinese tourists have come to the city to buy handbags, watches and designer clothing. The territory's retail sales fell for a seventh straight month in September.

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Total tourist arrivals slipped 4 percent in September from a year ago. Mainland visitors, which accounted for 77 percent of the visitors to Hong Kong, fell 4.7 percent in the month, according to Hong Kong Tourism Board data.

Sa Sa's net profit fell to HK$153 million ($19.7 million) for the six months ended in September from HK$339.8 million a year ago. Revenue fell 10.6 percent to HK$3.78 billion from HK$4.23 billion a year earlier. The company said in a statement the coming year will be a challenging one.

Shares of Sa Sa rose 4.6 percent in Tuesday afternoon trading, beating a 0.9 percent drop in the benchmark Hang Seng index. Shares of smaller rival Bonjour Holdings were down 4 percent.

$1 = 7.7499 Hong Kong dollars