Hong Kong Slowdown Hits Chow Tai Fook

RAPAPORT… Sales in Chow Tai Fook’s Hong Kong stores dropped sharply in the first fiscal quarter amid a decrease in tourism and weak consumer sentiment due to the coronavirus pandemic.

Retail sales slid 69% in Hong Kong and Macau in the three months ending June 30, while same-store sales — at branches open for at least a year — plunged 76%, the jeweler reported Tuesday.

That drop heavily outweighed a 0.1% increase in retail revenues in mainland China. Same-store sales in China slipped 11% during the period. Same-store sales only include shops Chow Tai Fook operates itself, as opposed to franchises.

“The Covid-19 situation and the volatile macro environment continued to weigh on the retail demand in mainland China and Hong Kong and Macau during the quarter,” the company said. However, the jeweler noted that the period saw a more modest decline in same-store sales compared with the previous quarter, as businesses were allowed to reopen, it added.

Hong Kong-wide retail declines in April and May were partly due to the lack of tourism to the municipality from China, an important source of luxury demand, the territory’s Census and Statistics Department has explained in recent statements.

Gem-set jewelry sales plummeted 66% on a same-store basis at Chow Tai Fook stores in Hong Kong and Macau, and slipped 7% in China as consumer traffic remained weak. Revenue from gold jewelry fared worse, crashing 83% in Hong Kong and Macau due to the volatility in the metal’s price, which rose 31% over the same period a year ago. Sales of gold jewelry dropped 20% in mainland China.

As the virus sees a resurgence in Hong Kong, the government has begun tightening measures to stem its spread. As of July 15, the government has required multiple types of businesses to suspend operations, including fitness centers, public entertainment venues and beauty parlors. It has also restricted the opening hours of restaurants and public gathering places. It has yet to implement restrictions for retail stores.

During the quarter, Chow Tai Fook added a net 49 locations in China, and closed three in Hong Kong. The jeweler had a total of 3,896 points of sale at June 30.


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