Hong Kong company reporting season

Chow Tai Fook net profit rises 3.9pc, says it will open 100 new shops this year

Jeweller says it will open up to 100 new retail locations to tap resurgent spending by mainlanders on luxury goods

PUBLISHED : Thursday, 08 June, 2017, 9:57pm
UPDATED : Friday, 09 June, 2017, 11:46pm

Chow Tai Fook Jewellery, the world’s largest listed jeweller by market value, said on Thursday that it plans to add up to 100 new retail locations on the mainland after reporting earnings that matched expectations, thanks in part to a rebound in mainland Chinese consumption of luxury products.

The jewellery chain saw its net profit for the 12 months to March rise 3.9 per cent year on year to HK$3.06 billion (US$390 million), or 30.6 HK cents per share. That was in line with the estimates of analysts polled by Thomson Reuters.

The company will pay a final dividend of 10 HK cents per share and a special dividend of 20 HK cents per share.

Revenue fell 9.4 per cent to HK$51.2 billion, compared with a 12 per cent decline in the 2016 financial year.

Chow Tai Fook planned to expand its network on the Chinese mainland, executive director Adrian Cheng Chi-kong said during the results briefing on Thursday evening.

“The group wants to open 70 to 100 more stores in mainland China in the next financial year, mainly in third-tier and other cities,” Cheng said.

The firm opened three new retail locations in South Korea, Malaysia and the United States last financial year to capture the growing opportunities among mainland tourists.

“As a long-term initiative, we will reach out to wholesalers in the US, given our well-established relationship with retailers,” Cheng said.

In the past financial year, Chow Tai Fook closed seven shops in Hong Kong and Macau while opening new ones on the mainland, resulting in a net gain of 67 outlets over the period. The company had 2,381 retail locations at the end of March.

Shares in Chow Tai Fook added 1.71 per cent to HK$8.35 on Thursday. They have jumped 41 per cent so far this year.

Resurgent demand on the mainland, which accounted for more than three quarters of the retailer’s earnings, helped deliver 14 per cent growth in its core operating profit for the second half of the 2017 financial year.

“Steady salary growth made mainland consumers more confident in buying luxury goods as a way to indulge themselves,” said Jacques Penhirin, partner and managing director for greater China at consultancy Oliver Wyman.

The recent recovery aside, Chow Tai Fook is also struggling to fend off competition from affordable fashion jewellery names such as Pandora, which are sought after among millennials.

The chain’s upbeat figures painted a rosier picture for global luxury houses, particularly jewellers and watchmakers that count the mainland as a key market.

Many international luxury brands have endured a multi-year downturn due to Beijing’s crackdown on ostentatious spending and a deepening economic slowdown since 2013.

This article has been amended to say Chow Tai Fook will focus on expanding its retail network mainly in mainland China and its store openings on the mainland in the next financial year will be in third-tier and other cities as well as fixing typographical errors