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Hong Kong protests: How they're hurting big companies

The ongoing pro-democracy protests in Hong Kong have ravaged the region and are threatening the safety and livelihood of residents — and businesses.

As the most recent quarter drew to a close, companies noted the Hong Kong protests in their earnings releases and conference calls. Of the 20 major companies reporting, most said they saw a negative impact on their businesses, while some said there was no impact and one actually noted some positive impact.

Here’s what major corporations said on their latest conference calls about the Hong Kong protests:

HONG KONG, CHINA - 2019/08/23: Protesters form a human chain in front of a HSBC bank branch. Thousands of Hong Kong protesters link hands to form human chain across the city to call for democracy during the Hong Kong way event. The chains, which traced three subway routes, totaled around 40 kilometers (25 miles) in length. The protesters said they were inspired by the "Baltic Way', when millions created a chain across three countries (Estonia, Latvia and Lithuania) to protest Soviet occupation exactly 30 years ago, and is the latest in the nearly 11-week-old movement that began with calls to scrap a now-suspended extradition bill and has broadened to include demands for full democracy and an independent inquiry into alleged police brutality. (Photo by Geovien So/SOPA Images/LightRocket via Getty Images)
HONG KONG, CHINA - 2019/08/23: Protesters form a human chain in front of a HSBC bank branch. (Photo by Geovien So/SOPA Images/LightRocket via Getty Images)

Estée Lauder (EL)

The cosmetic company had a tough fiscal-first quarter in Hong Kong. Sales fell 20% amid the demonstrations in the region.

“Disruptions in Hong Kong affected commerce in that area,” CEO Fabrizio Freda said on the company’s earnings conference call. “Our business in Hong Kong was challenged. Our sales declined 20% in the quarter and we have not seen sign of improvement to-date. However, since the last downturn in the market, we have re-positioned our business and increased sales with local consumers becoming less dependent on tourists, which was the most affected area.”

The company slashed its full-year adjusted earnings per share guidance and noted the challenges in Hong Kong. “Now, let's turn to our outlook for next quarter and for the full year. We are pleased obviously with the strong start to our fiscal year, but we recognize that a variety of macro risks such as ongoing trade tensions, Brexit and continued challenges in Hong Kong's retail environment could impact our fiscal 2020 results,” CFO Tracey Travis said.

Coty (COTY)

Beauty company Coty has been on a tear this year, with shares soaring more than 100%. However, during its most recent fiscal first quarter, sales fell short of expectations, even as profit beat.

Management explained that the Hong Kong protests impacted sales to some degree in Asia.

“While our revenue growth was broad-based, in part helped by easier comparables, some of our sales were impacted by the protest in Hong Kong,” Coty CFO Pierre-André Terisse said on the company’s earnings call. “This has been hampering our growth in the city and the surrounding travel retail corridor throughout the quarter.”

HONG KONG, CHINA - 2019/10/31: A protester dressed as Disney princess wear a black mask during the rally. Protesters at Halloween march in Hong Kong island despite police banned rallies and confront them during the night. (Photo by Miguel Candela/SOPA Images/LightRocket via Getty Images)
HONG KONG, CHINA - 2019/10/31: A protester dressed as Disney princess wear a black mask during the rally. Protesters at Halloween march in Hong Kong island despite police banned rallies and confront them during the night. (Photo by Miguel Candela/SOPA Images/LightRocket via Getty Images)

Disney (DIS)

Media behemoth Disney posted a better-than-expected fiscal fourth quarter after the market close Thursday. Revenue from its Parks, Experiences and Products segment grew 8% year-over-year to $6.66 billion.

Nevertheless, international theme parks were just in-line with the same period last year amid a challenging environment at its Hong Kong park.

“Results at our international operations were comparable to the fourth quarter last year as operating income growth at Disneyland Paris and Shanghai Disney Resort was largely offset by about a $55 million decline at Hong Kong Disneyland, as circumstances in Hong Kong have led to a significant decrease and horizon from China and other parts of Asia,” Disney CFO Christine McCarthy said on the company’s earnings call. “And based on the trends we saw in Q4 and what we are seeing so far in Q1, we expect operating income at Hong Kong Disneyland to decline by about $80 million for Q1. If the current trends continue, we could see a full year decline of approximately $275 million versus fiscal 2019.”

Tapestry (TPR)

The parent company of Coach, Kate Spade and Stuart Weitzman reported fiscal-first quarter revenue that missed Wall Street estimates on Tuesday.

“While our first quarter EPS was better than the forecast we shared with you in August, embedded in our results are external and internal challenges ranging from the situation in Hong Kong to competitive pressures to self-induced mistakes,” CEO Jide Zeitlin said on the company’s earnings conference call.

Coach accounts for about two-thirds of total revenue for Tapestry and saw same-store sales of 1% during the quarter, which was in line with analysts’ expectations. In regards to Coach’s performance during the quarter, Zeitlin noted, “Our Greater China business was constrained by the situation in Hong Kong; however, we continue to drive positive same-store sales on the Mainland as well as in Taiwan.”

Capri Holdings (CPRI)

Michael Kors, Versace and Jimmy Choo parent company, Capri, blamed its most recent profit miss on challenges associated with Hong Kong.

Most notably in August, Capri’s brand Versace was under intense fire from China for listing Hong Kong and Taiwan as both a city and country on a t-shirt. Donatella Versace, the company’s chief creative officer, publicly apologized to Chinese citizens for the mishap.

“Never have I wanted to disrespect China’s National Sovereignty and this is why I wanted to personally apologise for such inaccuracy and for any distress that it might have caused,” she said on her Instagram account.

However, the damage was done.

“We initially saw a negative consumer reaction to that product and what on the Mainland it represented to people. I think we're slowly seeing that subside, CEO John Idol said on the company’s earnings call. “So, we've got a very cautious view of how we're planning the greater China business in total for Versace for the balance of the year. I think we're going to see recovery from the t-shirt situation more in the fourth quarter and probably the first quarter of next year. But we've taken a very, very conservative point of view across the whole company for Hong Kong, while we hope that, that situation gets resolved. We don't see any end in sight.”

VF Corp (VFC)

The parent company of Vans, Timberland and The North Face reported fiscal Q2 earnings and revenue that missed Wall Street’s expectations. Management blamed several factors for the weakness with Hong Kong among them.

“The environment has become more uncertain over the past several months,” CEO Steve Rendle said on the conference call. “Several factors, mainly FX, tariffs and the ongoing disruption in Hong Kong have largely offset the underlying operational strength of our business since we provided our last outlook in July.”

“The situation in Hong Kong has modestly impacted our regional performance. We will continue to evaluate all aspects of our business as events continue to unfold,” he added.

Crocs (CROX)

Crocs posted a stronger-than-expected third quarter and beat estimates on both the top and bottom lines. However, the company also noted some challenges in Hong Kong during the quarter.

“We have a small number of stores in Hong Kong that were significantly impacted by everything that's going on there,” CEO Andrew Rees said on the company’s earnings call.

CFO Anne Mehlman said, “Lower wholesale revenues mainly reflect the timing of revenues between quarters and ongoing efforts to reposition our business in China. Retail comps declined primarily due to continuing unrest in Hong Kong and weakness in our Korean shop in shops.”

Levi Strauss (LEVI)

Levi’s reported a beat on the top and bottom lines during its third quarter, as international and e-commerce sales continued to expand. While sales in Asia were solid, sales in Hong Kong lagged.

“Asia also posted a strong quarter, notwithstanding, macro volatility from tariff talks and protests in Hong Kong. The region's net revenues grew 9% on a reported basis and 12% in constant currency,” CEO Harmit Singh said on the company’s earnings conference call. “Hong Kong was a notable exception in the region. The ongoing protests there impacted traffic and caused some of our stores to close temporarily, costing the region about one point of growth.”

Fossil Group (FOSL)

Fossil’s third-quarter shocked investors when the company reported an unexpected loss and net sales were lighter than analysts’ projections. The company also slashed its fourth-quarter net sales and gross margin forecast, which sent shares plunging.

Despite the company’s struggles, management noted that it did not see a meaningful impact to its business from the Hong Kong protests. “From a Hong Kong perspective, it's not a significant business for us overall in the mid-price fashion watch business on it,” CEO Kosta Kartsotis said on the company’s earnings call. “So,we're not seeing a huge impact. It is being impacted by the activities there, but not having a global impact on us, given the size and scale that we have in Hong Kong.”

Shake Shack (SHAK)

Shake Shack announced during its most recent earnings announcement that it opened its third restaurant in Hong Kong. In addition, the burger giant also opened up its first international office in Hong Kong to support its licensed businesses in Asia.

The company has been focused on its international expansion, and as a result, boosted its revenue guidance for the full year and now expects between $592 million to $597 million, up from the previously expected $585 million to $590 million.

“Part of why we've been able to raise that guidance is we've done so well this year with so many of those big-hitting Shacks,” CEO Randy Garutti said on the company’s earning conference call. “Part of the potential limitation there, though, is Hong Kong. We have definitely been impacted there. I talked about it in my notes, mostly related to 2020, but we've definitely been impacted there. We've got a lot of closures. We have our three Shacks that are open there in some of the best locations, you can imagine in Hong Kong, and that city has changed right now. So, in this turn, that's part of the balancing of the fourth quarter potential.”

Marriott International (MAR)

The hotel behemoth reported third-quarter profit that missed estimates November 4. Marriott also slashed its full-year guidance amid slowing travel demand.

The company noted that revenue per available room (RevPAR), a key industry metric, fell substantially in Hong Kong during the quarter. On the earnings conference call, Hong Kong was mentioned 17 times.

“Recent events in Hong Kong make that market quite difficult to forecast. Our Hong Kong RevPAR declined 27% in the third quarter,” CEO Arne Sorenson said on the company’s earnings call. “We expect RevPAR at our Hong Kong hotels will decline roughly 40% in the fourth quarter. For the full year 2020, we are assuming a mid single-digit RevPAR decline in the city. Obviously, any estimate for Hong Kong RevPAR performance is somewhat speculative. So while we hope comparisons will ease in the second half of 2020, we are only making a modeling assumption.”

CFO Kathleen Oberg added the financial impact of the Hong Kong protests. “Arne discussed third quarter RevPAR performance to the Hong Kong market. Total fees from our Hong Kong hotels declined $3 million during the third quarter compared to the prior year, and we estimate such fees could decline by $5 million in the fourth quarter. Currently, for the full year 2019, we expect our dozen hotels in Hong Kong will contribute roughly $30 million in total fees.”

Hilton Worldwide (HLT)

Much like rival Marriott, Hilton also noted meaningful challenges related to Hong Kong during its third quarter. Even as third-quarter profit beat expectations, and the company boosted its full-year outlook, Hilton reported softer-than-anticipated RevPAR during the quarter.

“Hong Kong obviously had a tough quarter. Hong Kong was down 40% for us,” CEO Christopher Nassetta said on the company’s earnings conference call. “And that means, if you did the math, Mainland China was down a little less than 3%. If we look at the full year, what we think we will deliver, and Hong Kong, it's obviously still sort of in play, we think Greater China will be down, sort of low-single digits, so call it 3%. Mainland China, we think will be flat to down a point or something like that and the Hong Kong down 23%, 25%.”

Hyatt Hotels (H)

Hyatt opened its first hotel in Hong Kong 50 years ago, but the hotel chain has experienced serious difficulty in the region during its most recent quarter. RevPAR plunged a whopping 50% in Hong Kong during October and saw a 36% decrease during the third quarter.

“The second major contributor to the downward pressure we reported on our RevPAR results is the ongoing disruption in Hong Kong,” CEO Mark Hoplamazian said on the earnings conference call. “While there is uncertainty as to when the disruption in Hong Kong may end or when the trade concerns will dissipate, we continue to have great confidence in the long-term prospects in Greater China and we are excited about our growth plans there.”

CFO Joan Bottarini explained the company’s thinking behind guidance. “So as we're in the middle of the planning process, we [are] considering what the impact will be of the length of the disruption in Hong Kong and resolution to the trade situation in China as well as the US election that is ahead of us next year. So some of the uncertainties as you all know are things that we're keeping in mind as we think about planning for next year, over the course of the quarters, first half, second half of next year and we'll provide an update on our fourth quarter earnings call, where we think things will -- where our expectations will be.”

Wynn Resorts (WYNN)

Though Wynn Resorts doesn’t operate any properties in Hong Kong, it has a big presence in neighboring Macau. On the company’s most recent earnings conference call, one analyst asked management if the casino operator experienced any impact from the prolonged protests in Hong Kong.

“It's really hard to quantify, because you're seeing visitation in Macao increase,” CEO Matt Maddox said in response. “I do think that it has impacted our premium business that would be the fly-in traffic at the Hong Kong that gets picked up in one of our luxury cars and driven over to Wynn Palace or Wynn Macao. But I think it's been hard for us to actually quantify that impact.”

Ian Coughlan, president of Wynn Macau, added, “There's been some residual impact more about people that would travel to Hong Kong and then come on to Macau. But I don't think it's being market significantly impactful. With all the other headwinds that are there, it's hard to break out. As long as the airport stays in operation that's a very good fee deferrals as you referenced in the premium mass sector.”

Melco Resorts (MLCO)

Much like Wynn, Melco Resorts operates casinos in Macau. During its third quarter, the casino chain announced net revenue that beat expectations, and adjusted EBITDA rose 42% year-over-year.

“I'm very pleased with our third quarter performance with our luck-adjusted property EBITDA growing 11% sequentially, and 25% year-over-year to an all-time record high of $439 million, despite third quarter market-wide gaming revenues experiencing a modest decline in Macau,” CEO Lawrence Ho said on the company’s earnings call. “The strong set of financial results was driven by our robust mass table revenue growth of 22% year-over-year in spite of macro headwinds and the events in Hong Kong.”

When asked about the Hong Kong protest impact, President David Sisk replied, “We've not seen anything at this point. If anything, we've actually seen a little bit of traffic coming in more from Hong Kong, as people maybe want to get away from the protest a little bit.”

MGM Resorts (MGM)

MGM operates resorts all over the world, including properties in both Macau and Cotai. During its most recent quarter, MGM reported revenue that fell short of expectations due to a fall in gambling revenue at its Las Vegas Strip resorts.

China’s third-quarter adjusted property EBITDA rose 40% year-over-year and totaled $182 million. On the company’s earnings conference call, an analyst asked if the company saw any impact from the Hong Kong unrest.

“Actually, the Hong Kong situation is somewhat independent of us, but I think obviously there is a lot of confusion,” CEO Grant Bowie said. “We haven't seen any direct impact, I think, visitors are starting to change their travel strategies. So we just got to keep the things stable and make sure we promote Macau as, unfortunately a separate destination and make sure that we can allow those customers to come in and get out of Macau effectively. So nothing really there.”

Riot police stand guard at an entrance of the airport in Hong Kong, Sunday, Sept.1, 2019. The operator of the express train to Hong Kong's airport has suspended service as pro-democracy protesters gathered there following a day of violent clashes with police. Protesters gathered at the airport after online calls to disrupt travel. (AP Photo/Kin Cheung)
Riot police stand guard at an entrance of the airport in Hong Kong, Sunday, Sept.1, 2019. (AP Photo/Kin Cheung)

United Airlines (UAL)

In mid-August, Hong Kong protesters shut down the airport causing serious travels disruptions as hundreds of flights were canceled. One of the American airline companies affected was United Airlines. Even as the airline boosted its 2019 profit outlook following its third quarter earnings in October, management noted challenges in Hong Kong as a result of the protests.

“Performance across the Pacific further weakened in the quarter with a negative 3.4% decrease in [passenger revenue per available seat mile] PRASM on a 2.3% increase in capacity. All the weakness occurred in Hong Kong and to a lesser extent Beijing and Shanghai. As we indicated earlier in the quarter, Hong Kong, Beijing, and Shanghai reduced our Q3 system performance by about 0.5 point,” United’s Chief Commercial Officer, Andrew Nocella, said on the company’s earnings conference call. “Hong Kong demand, while weak, has for the moment stabilized. We expect Pacific year-over-year PRASM performance in the fourth quarter to improve versus the third quarter.”

Delta Air Lines (DAL)

Delta Air Lines’ management didn’t express as much concern about the Hong Kong protests’ impact on its business during its third quarter.

“Pacific unit revenue also continues to show improvement aided by our China restructuring last year with unit revenue up 1.6%,” Delta CFO Derek Kerr said on the company’s earnings call. “Specifically, Japan and Australia were up year-over-year, while we face challenges in Hong Kong and Korea.”

Hong Kong posed challenges to the company, but the protests were not the main reason for weaker-than-expected fourth-quarter guidance.


U.K.-based banking giant HSBC derives about 90% of its profits from Asia. In its most recent quarter, the company reported plunging profits and said that it would scale back its underperforming operations amid concerns of slowing global growth and geopolitical uncertainty.

However, on the company’s earnings conference call, management said that performance in Hong Kong was better than many had anticipated, particularly in the third quarter.

“Commercial Banking continued to grow revenue and balances, particularly in Hong Kong and the U.K. Retail Banking held up well in Hong Kong, despite the current situation there,” HSBC interim Group Chief Executive Noel Quinn said.

“I'd like to finish with a few words about Hong Kong and the U.K. We are committed to supporting both Hong Kong and the U.K. through the current challenges they face. And I would like to acknowledge the exceptional work and dedication of our people in helping our customers during this current period of uncertainty. At different times throughout our 154-year history, both Hong Kong and U.K. have faced significant challenges and HSBC has done whatever we can to help them through to the other side. HSBC has always taken a long-term view and will continue to do so.”

Ferrari (RACE)

The luxury business continues to shine amid all of the worries about an economic slowdown. Luxury carmaker Ferrari posted better than expected profit during its third quarter and raised its guidance for the year.

Ferrari’s shipments jumped 9% to 2,474 units during the third quarter. Even as protests cast a shadow over Hong Kong, the company said that it did not see a dip in volume in Hong Kong.

“In terms of China, your expectations were correct. I mean the fact is that China volume was down in the third quarter, considerably down, but that was offset by the increase in Hong Kong, where we effectively had a very similar phenomenon to what we had in China in the first half. So there were a lot of deliveries to customers in Hong Kong,” Ferrari CEO Louis Camilleri said on the conference call.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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