HONG KONG — Chow Tai Fook’s first-half net profit and sales tumbled at a double-digit pace as China’s austerity measures and political protests in Hong Kong bit into the fine jewelry business.
The jewelry giant said Tuesday that net profit for the six months ending Sept. 30 slid 24 percent to 2.69 billion Hong Kong dollars, or $347 million. Revenue declined by 22 percent to 29.32 billion Hong Kong dollars, or $3.78 billion.
Chow Tai Fook said a slump in gold prices in 2013 created last year’s gold rush. As prices of the precious metal rebounded, demand has “resumed gradually to normal” and the company improved its product mix to include more higher margin gem-set jewelry.
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Overall same store sales declined by 31.2 percent during the six-month period. Same store sales in mainland China fell by 20 percent while same store sales in Hong Kong, Macau and Taiwan declined by nearly 41 percent, Chow Tai Fook said.
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Chow Tai Fook, like other retailers in Hong Kong, has been hit by Chinese austerity measures curbing luxury spending as well as slowing visitor growth by mainland Chinese tourists. Traffic disruptions and temporary travel ban on mainland tour groups to Hong Kong during Golden Week have put a dent in sales. Earlier this month, Chow Tai Fook said October same store sales were down by 24 percent due to the Hong Kong pro-democracy demonstrations. The jeweler had to close or shift operating hours at as many as a third of its store locations during the height of the protests. Despite this, Chow Tai Fook called the recent disruptions temporary and said it continues to expand its footprint in the region, though it is taking a “flexible approach” to its rollout strategy in Hong Kong and Macau.
Total points of sale numbered 2,191 at the end of September, up 114 from the end of March. Some of the new points of sales include those from luxury diamond brand Hearts on Fire which Chow Tai Fook acquired in August. Chow Tai Fook said it plans to double the number of points of sales in the coming decade as well as step up its e-commerce channel.
The jeweler said the market downturn during in the six month period “came as no surprise given the relatively slow economies in Hong Kong and mainland China” and that “the situation was not all that bleak,” citing signs of resilience such a narrowing decline in revenue during the second quarter. The company “is confident that these improvements will continue in the light of the festive shopping sprees in the second half of the financial year and the momentum will sustain moving forward.”
Economic growth in China, though slowing, continues to be faster than elsewhere in the world. Chow Tai Fook cited China’s stable employment and rising disposable incomes are factors supporting its optimistic business outlook.
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