Major China/Hong Kong Jewelry Retailers Trend Positive in Q2

25/10/2017 10:55

Two leading Hong Kong-based jewelry retailers, Chow Tai Fook and Luk Fook, delivered strong results in the second quarter of their respective financial years ending September 30 2017, signalling the sustained recovery of the Greater China market after a prolonged slump. Chow Tai Fook reported a 15% increase in retail sales in Mainland China and a 12% rise in Hong Kong and Macau compared to the same period a year ago. Luk Fook, reporting only same-store sales (SSS), reported 17% growth year on year, including a 16% increase in gem-set jewelry. These positive result come on the heels of the tentative turnaround initiated in Q4 of the previous fiscal year, which ended a run of three consecutive years without positive growth. 

Chow Tai Fook: SSS of gem-set jewelry in Hong Kong & Macau up 7% after 13 consecutive quarters of decline

For the quarter as a whole, overall retail sales and same-store sales witness significant growth, mainly driven by gold products, as both volume and average selling price (ASP) increased. The increase in ASP was primarily attributable to the gain in the average weight per gold product sold, as the average international gold price in the quarter declined by 4% compared to same period last year. SSS performance of gem-set jewelry in Mainland China declined slightly (-1%), yet same store ASP improved to $833 (HK$6,500) from $782 (HK$6,100). SSS of gem-set jewellery in Hong Kong and Macau recorded a positive growth, increasing by 7% after 13 consecutive quarters of decline since the first quarter of FY2015. The improvement, according to the company, was primarily attributable to "remarkable volume growth" during the quarter, as the average sales price fell to $1,371 (HK$10,700) from $1,615 (HK$12,600).

The group opened a net of 79 points of sale (POS) during the quarter, which included a net opening of 83 POS in Mainland China, 1 POS in Macau, and a net closing of 4 POS in Hong Kong and 1 POS in Taiwan, bringing the total number of POS to 2,488 as at 30 September 2017.

Luk Fook: Benefits from market improvement

Luk Fook Holdings Ltd., reporting solely on same-store sales, reported 17% total growth and a 16% rise in gem-set jewelry during the three-month period. SSS in Mainland China as well as Hong Kong & Macau recorded strong growth at +11% and +18% respectively, but gem set-jewelry sales in Mainland China fell by 2%. The retailer notes that sales of gem-set jewelry products in Hong Kong and Macau market benefited from the market improvement as well as the successful introduction of more varieties of stylish yet good-value-for-money products, resulting in a +16% increase in overall SSS of gem-set jewelry products in 2Q FY2018. They note, "Although the sales performance in July and August of the current year was promising in Mainland market, the performance in September fell behind due to the lack of sales-driven promotional activities for the Mid-Autumn Festival in the same period last year. As a result, the SSS of gold products in Mainland China rose +19% only, while that for gem-set jewelry products decreased by 2%."

During the period, the Group opened 1 Luk Fook self-operated shop in San Francisco. There was a net addition of 33 Luk Fook shops in Mainland China, which included 9 self-operated shops and 24 licensed shops. With an improved market environment, the Group’s target net additions of shops in Mainland China for FY2018 increased from 50 shops to 80 shops. As at 30 September 2017, the Group had a total of 216 Luk Fook self-operated shops including 151 in Mainland China, 45 in Hong Kong, 10 in Macau and 10 overseas. As at the same date, together with 1,325 licensed shops in Mainland China and 1 licensed shop in Korea, there were a total of 1,542 Luk Fook shops worldwide, of which 1,476 shops were located in Mainland China.