Chow Tai Fook’s 1st-half profit drops 21.5 per cent on lacklustre demand

Chow Tai Fook Jewellery Group, the world’s largest publicly traded jewellery chain, reported a 21.5 per cent drop in its first-half earnings, due to a lacklustre consumer demand.

The Hong Kong-based jeweller controlled by one of Asia’s richest families saw its net income slide to HK$1.22 billion for the six months ended September 30, from HK$1.56 billion a year earlier. Revenue dropped 23.5 per cent to HK$21 billion from the same period last year.

Having grappled with a lingering downturn in the luxury retail business in Hong Kong and mainland China, the 87-year-old company now sees signs of being able to regain its footing, as its profit decline had slowed from last year’s 42 per cent plunge.

The latest sales figures also came as a relief as jewellery and watch sales traditionally are traditionally strong gauges for the health of Hong Kong’s retail industry.

“Benefiting from the kick-in of rental reduction cycle, our rental expenses in Hong

Kong and Macau dropped by approximately 10 per cent in the first half of the financial year 2017,”chairman Henry Cheng said in a filing to the Hong Kong bourse on Tuesday. “Such downward adjustment is expected to continue in the rest of the financial year.”

Chow Tai Fook shares gained 2.6 per cent to HK$5.80 on Tuesday ahead of the result announcement. The stock had fallen 2.5 per cent in a year.

The company had been consolidating its stores in Hong Kong, where mainland visitor numbers are dwindling, and Cheng revealed more shops would be shut down in tourist areas during the second half, following the closure of six stores during the first half.

The company added 107 more jewellery stores across mainland China during the first half, with dozens of them in shopping malls, while closing 94 stores in other locations. Cheng said the company would remain “selective” in expanding in the mainland.

With Chinese consumers increasingly shifting their purchases online from brick-and-mortar outlets, Chow Tai Fook has begun selling gold necklaces and jadeite bracelets on Chinese e-commerce platforms. Its online retail sales value jumped 22.5 per cent from the previous year.

Same-store sales of Chow Tai Fook’s jewellery business in mainland decreased 20.9 per cent, while that in Hong Kong and Macau slipped 25.7 per cent year on year, which it blamed on lukewarm consumer sentiment.

The city’s retail sector is showing signs of stabilisation, with September retail sales dropping at the smallest monthly rate in almost a year, according to official data. It was an improvement from the 10.5 per cent plunge in the previous month.

Chow Tai Fook is controlled by family of the late Cheng Yu-tung, the city’s third-richest man. Cheng has built the jewellery store into a chain with hundreds of outlets across Greater China since he got married to the goldsmith owner’s daughter seven decades ago.