Hong Kong Rebound Supports Luk Fook Sales

Luk Fook’s sales and earnings were steady year on year in the first fiscal half as an improvement in the Hong Kong market offset weakness in mainland China.

Revenue slipped 0.3% to HKD 5.57 billion ($713.1 million) in the six months ending September 30, the Hong Kong-based jewelry retailer reported Monday. Net profit crept up 0.6% to HKD 657.6 million ($84.1 million).

Hong Kong has seen a recovery following an easing of government Covid-19 rules, while tight lockdowns in Chinese cities have led to the opposite trend on the mainland.

A drop in gold prices also enticed shoppers and boosted retail sales in Hong Kong, management explained. However, weaker demand for fixed-price jewelry — items sold at a price determined by the retailer rather than by weight — led to a drop in wholesale revenue, especially on the mainland. In Hong Kong, the company mostly sells directly to consumers at self-operated stores, while the mainland business skews toward licensed shops to which it supplies on a wholesale basis.

Overall sales in Hong Kong jumped 17% year on year to HKD 2.9 billion ($370.8 million), while mainland revenues slid 14% to HKD 2.68 billion ($342.2 million).

The momentum in Hong Kong and Macau continued in October and the first three weeks of November 2022, with same-store sales in those locations growing 20% year on year. The mainland saw a 21% decline by the same measure.

Image: A Luk Fook store in Hong Kong. (Shutterstock)