Coach shrinks Hong Kong presence amid drop in China shoppers

By Clare Baldwin and Adelaide Hui

HONG KONG, Aug 28 (Reuters) - Leather goods maker Coach Inc (HKSE: 6388.HK - news) is shutting one of its three flagship locations in Hong Kong next week, the latest retailer to be hit by the drop in the number of mainland Chinese visitors to the city amid a slowing economy and weaker yuan.

The store towers above Queen's Road Central in the central business district of a city where high rents and labour costs, as well as slowing sales, have hit other retailers.

Coach said the store would close on Aug 31 but said it remained committed to the Hong Kong and China markets.

Earlier this month, Coach said its mainland China sales grew 9 percent year-on-year to $595 million in fiscal 2015, but growth in Hong Kong and Macau was slower.

"Sales growth in China was driven entirely by the mainland, as Hong Kong and Macau continued to experience traffic declines from a decrease in PRC (People's Republic of China) tourists," Chief Executive Victor Luis said on an Aug. 4 earnings call.

For this fiscal year, China sales growth is forecast to slow to about 5 percent, the company said.

Chinese tourists have been the main customers of Hong Kong's luxury retailers, but the slowing economic growth and the recent devaluation of the yuan have dented their once voracious appetite for goods ranging from cosmetics to luxury watches.

Tighter visa rules and a flare up of anti-Chinese sentiment in Hong Kong have also contributed to the decline in mainland visitors. Hong Kong's retail sales fell for the fourth straight month in June.

(Editing by Miral Fahmy)