Sales at Hong Kong-based jeweler Luk Fook fell in the second fiscal quarter amid soaring gold prices that impacted consumer sentiment, and a continued downturn in diamond demand.
Total sales slid 16% compared with the same period a year ago for the three months that ended September 30, the company reported last week. Same-store sales — at self-operated shops open for at least a year — decreased 35%.
The retailer attributed a large portion of the downturn to a 29% rise in the price of gold during the quarter, which weakened consumer sentiment toward the yellow metal. The company also suffered from a weak comparison with the same period a year ago, when luxury saw a boom after the border between Hong Kong and China reopened earlier that year, and consumers were able to travel to purchase goods.
“The consistently record-breaking gold prices impacted sales in the quarter, and when combined with the high base effect, the performance of the second quarter was similar to that of the previous quarter,” the company noted. “The average international gold price in US dollars per ounce rose by 29% year on year during the quarter. The high gold prices have weakened consumer sentiment.”
In Hong Kong and Macau, sales dropped 31%, while they went down 13% on the mainland. Same-store sales of gold — priced by weight at international market rates — plunged 38% year on year during the quarter, while “fixed-price jewelry,” which refers to products sold at prices determined by the retailer, declined 24%. Overall, same-store sales of fixed-price gold products increased 11%, while fixed-price diamond goods plummeted 45%.
Same-store sales of gold products fell 41% in Hong Kong and Macau, and 27% in China, and fixed-price diamond jewelry slid 47% on both the mainland and in Hong Kong and Macau.
Luk Fook has seen an uplift in sales of gold products since the start of the third fiscal quarter. However, diamond sales remain weak.
“The decline in same-store sales…has narrowed since September,” the company explained. “Therefore, from October 1 to 14, the group’s overall same-store sales performance showed some improvements as compared to the second quarter. Although the temporary 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 gold products are expected to resume to 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 jewelry display at a Luk Fook store in Macau. (Shutterstock)
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