Forever 21 to shut Hong Kong flagship store next August

Fast-fashion retailer Forever 21 will close down its flagship in Hong Kong next August after its leases ends, according to OC&C Strategy Consultants.

The six floor, 51,188-square-foot mega store at Capitol Centre, Causeway Bay, currently costs HK$13.8 million per month, The Standard reported. It is rumored to be taken over by American lingerie brand Victoria's Secret at a price of HK$7 million, or HK$17 per square feet, which is half the current monthly amount. Industry sources said Victoria's Secret has signed a 10-year lease for the prime location.

Jack Chuang, partner at Greater China, OC&C Strategy Consultants, said that the upcoming closure is a result of high rent and a drop in mainland tourists.

"When Forever 21 set up their flagship store in 2011 in Causeway Bay, it was the golden period of mainland travelers, where we saw approximately 30 million mainland tourists in 2011 with 20 to 30% growth every year with Causeway Bay being one of the top locations for mainland tourists in terms of shopping. Therefore, the high rent Forever 21 got for that location is partially based on the significant growth potential of mainland tourists," he explained.

"However, given the decrease in mainland tourists in recent years, the traffic is much worse than expected, therefore their revenue may not justify the rental cost."

Chuang added that a cooling down on the ‘fast fashion’ trend also impact the brand. "Since quality is perceived to be increasingly important by consumers with regards to apparel, fast fashion brands may start to face challenges. We have seen this with brands such as H&M and Uniqlo, which have also seen decreasing profitability recently."

According to Chuang, Forever21 will shift their investments from maintaining the flagship to opening smaller stores. The retailer has recently opened a new store with around 19,000 square feet at the Pakpolee Commercial Centre in Mong Kok.

While the current space now seems much bigger than is necessary, the size is understandable for a company building its brand, Chuang said.