Hong Kong Tourism Slump Hits Luk Fook

RAPAPORT… Sales slid at Hong Kong-based Luk Fook in the past fiscal year as the Covid-19 pandemic devastated the tourism industry in the jewelry retailer’s home territory.

Group revenue dropped 21% to HKD 8.86 billion ($1.14 billion) for the 12 months that ended March 31, the company reported Thursday. Sales in Hong Kong tumbled 46% to HKD 2.41 billion ($310.4 million), outweighing an improvement in mainland China, where revenue grew 7% to HKD 5.31 billion ($684.2 million).

Visitor arrivals to Hong Kong from the mainland, an important source of luxury sales, nosedived last year as the coronavirus reduced travel. However, the border restrictions stimulated domestic spending among Chinese consumers, Luk Fook noted. Same-store sales in Hong Kong and Macau — at self-operated branches open for at least a year — fell 47%, while on the mainland they dropped 4.7%.

Same-store sales growth was positive in the fourth fiscal quarter ending March 31, as the comparison was with the peak of the virus crisis in greater China in early 2020. The recovery continued into the new financial year, with same-store sales in Hong Kong and Macau rising by around 120% for the period from April to the first two weeks of June 2021, the company reported. On the mainland, the figure jumped 50%.

Profit for the past fiscal year increased 17.5% to HKD 1.02 billion ($131.3 million) because of higher finance income and lower finance costs, Luk Fook said.

“In view of the anticipated considerable growth of the middle-class population in [the] mainland, the group remains optimistic about the mid- to long-term business prospects,” the company commented.

The retailer will focus its expansion on the mainland market, where it plans to add a net 350 stores in fourth- and fifth-tier cities this fiscal year.


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