Closing of DSC stores a shock to already troubled retail sector

Are the warning signs being heeded?

Barclays notes that it has already known that Hong Kong’s retail outlook was tough.

According to a research note from Barclays, though, the recent announcement that furniture and electrical appliance retailer DSC was shutting all 14 of its stores and putting more than 400 employees out of work was still surprising.

While homebuyers continue to focus on the positives of low interest rates and the ongoing upward momentum of home prices, Barclays believes important warning signs of slower growth and job security are potentially being ignored.

Here's more from Barclays:

On 3 August, DSC, a furniture and electrical appliances retailer with 14 branches in Hong Kong, suddenly closed down all branches, leaving more than 400 employees with unsettled payment of salaries.

According to Sing Tao Daily, there were notices posted on each shop’s door on the morning of 3 August informing that the company had closed its operations due to financial difficulty.

The labour union estimated the owner owed salaries for at least 400 staff for July, which amounted to at least HK$10mn. The owner and founder could not be reached by the Labour Department.

According to Sing Tao Daily, DSC had early success due to its competitive pricing. However, as more people live in smaller homes these days and the market was more in favour of smaller and tailored furniture, the company’s business model of supplying traditional furniture grew out of favour and operations had been difficult withsurging shop rents in recent years.