Tse Siu Luen sees interim profit drop 65%
Drop of 65% for first six months blamed on consumer changes and a jump in labour costs
Tse Sui Luen Jewellery (International) expects consumer confidence to remain weak in the short to medium terms after reporting a slide of 65 per cent in net profit for the six months to August.
The Hong Kong-based jewellery retailer said turnover for the period grew 6.1 per cent to HK$1.66 billion, but net profit fell significantly to HK$30.7 million year on year.
It blamed the profit decline to sales of lower-margin gold products, the increasing cost of labour and infrastructure and the ongoing economic slowdown in the country.
Overall retail sales during the recent National Day "golden week" holiday, for example, grew at a slower pace than last year.
The share price of Tse Sui Luen fell 1.2 per cent to close at HK$4.20 yesterday, on a day the benchmark Hang Seng Index dropped 0.4 per cent.
The company said in the interim report that sales of 24-carat gold in Hong Kong and Macau rose by 15 per cent during the period, while that of higher-margin jewellery products grew only 5.3 per cent.
The change in customer preferences has dragged down the overall gross profit margin to 47.4 per cent from 49.3 per cent a year earlier.
The high-end jewellery and watch industry in Hong Kong and the mainland has been cooling this year. Tse Sui Luen and Hong Kong jewellery retailer, King Fook, issued profit warnings in the past month.
Chow Tai Fook, the largest jewellery retailer in the region, has also said its same-store sales recorded a 1 per cent decline for the three months to June.
Tse Sui Luen chairwoman Annie Yau On-yee said the debt crisis in Europe and sluggish economy in the United States would continue to affect consumer confidence, limiting sales growth to a modest level similar to the first half.
Tse Sui Luen proposed an interim dividend of 1 HK cent per share for the period.