Hong Kong-based jeweler Luk Fook closed 175 stores in China and Hong Kong in the fiscal first half as rising gold prices hit revenue and earnings.
Weak demand for diamond jewelry also hurt sales, with group revenue down 27% year on year to HKD 5.45 billion ($700.2 million) for the six months that ended September 30, the company said Tuesday. Net profit slid 56% to HKD 417.2 million ($53.6 million) as a result of gold hedging during the period.
A weak comparison with the same period a year ago, when the luxury sector in Hong Kong rebounded following the reopening of its border with the mainland, impacted sales as well, the retailer explained.
Sales in Hong Kong, Macau and overseas dropped 27% year on year to HKD 3.51 billion ($451.4 million) for the period. Same-store sales slipped 35%, with gold and platinum products falling 37% and fixed-price jewelry products, including diamonds, down 30%. Sales on the mainland slumped 27% to HKD 1.94 billion ($248.8 million).
At the start of the third fiscal quarter, sales were looking up, Luk Fook said. However, the company still intended to prioritize gold jewelry over diamonds.
“Fortunately, the decline in same-store sales in the mainland…and the Hong Kong markets has narrowed since September,” it noted. “Therefore, from October 1 to mid-November 2024, the group’s overall same-store sales performance showed improvements as compared to the second quarter. Although the spike in gold prices may affect sales performance, an increase in profit margin will help mitigate the impact of the decline in sales. Sales of the gold products are expected to resume to the normal levels after consumers adapt to the high gold prices. Moreover, since the demand for diamond products remains subdued, the group will continue to actively promote non-diamond fixed-price jewelry products.”
Image: A Luk Fook store in Causeway Bay, Hong Kong. (Luk Fook)
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