Chow Tai Fook says the jewellery market in Hong Kong is recovering, after reporting a 13.2 per cent drop in net profit for the past financial year.
The country's largest fine jewellery retailer said in a filing yesterday that net profit for the year to March fell to HK$5.5 billion, lower than the HK$5.57 billion expected by the market.
Revenue rose 1.5 per cent to HK$57.4 billion, fuelled mainly by shop expansion and rising demand for mass luxury jewellery.
Overall same-store sales, however, fell 3.3 per cent while selling, distribution, rental as well as advertising and promotional expenses all soared. Net profit margin slid to 9.9 per cent from 11.6 per cent.
The retailer blamed the profit decline on cautious consumer sentiment in the wake of a weakening economy and the central government's crackdown on corruption.
Chow Tai Fook, a rival of Luk Fook and Chow Sang Sang, said it had achieved "exceptional sales performance" and "remarkable same-store sales growth" in the past two months as demand for gold products surged while international gold prices fell.
"The management believed that the gold-buying spree would only be a short-term stimulation as people were drawn to buy gold products in advance," chairman Henry Cheng Kar-shun said in the filing.
Despite the uncertain economic environment, Cheng said there were "signs of recovery" in Hong Kong's retail market as the number of tourists, especially those from lower-tier cities, increased steadily.
But Eugene Mak, an analyst at OSK Group, said it was unlikely that discretionary retailers such as Chow Tai Fook would see a turnaround this year.
"The outlook is still cloudy," Mak said. "Consumer confidence in the economy remains weak and we expect this situation to persist until the end of this year."
As of the end of March, the firm had 1,836 points of sale on the mainland, in Hong Kong, Macau and other Asian markets, a net rise of 209 from a year ago.
The company recommended a final dividend of 16 HK cents per share.
Shares in Chow Tai Fook yesterday closed 1.7 per cent lower at HK$8.66, before the financial results were released.