China Troubles Hit Luk Fook

RAPAPORT… Luk Fook’s same-store sales dropped 10% in the third fiscal quarter
amid economic weakness in greater China.



The depreciation of the Chinese yuan against the Hong Kong dollar
led customers to purchase cheaper products in the three months ending December
31, the retailer said Thursday.


Luk Fook, one of Hong Kong’s largest jewelers, derives a
significant proportion of its revenue from tourists visiting the municipality
from the mainland. The weakening of the yuan during 2018 reduced the purchasing
power of those consumers, causing same-store sales — at branches open for more
than a year — to fall 9% year on year in Hong Kong and Macau. Same-store
sales in mainland China slid 14%.


“The recent market sentiment was adversely impacted by the
US-China trade war, the depreciation of the [yuan], and the downward pressure
in the stock and property markets,” the company added.



Same-store gold sales in Hong Kong and Macau dropped 9%,
while gem-set jewelry purchases fell 8%. The currency effect led to a
double-digit decline in the average selling price of gem-set products, the
jeweler noted.


In China, same-store sales of gold products plunged 16%, while sales of
gem-set jewelry decreased 5% for the period.


Luk Fook’s results are for its self-operated stores, and exclude
licensed shops, which form the majority of its stores on the mainland.


Image: A Luk Fook store in China. (Luk Fook)