Shares of Lao Feng Xiang, one of China’s oldest jewelry brands, rose despite reporting a decline in annual earnings due to surging gold prices and shifting consumer preferences.
Lao Feng Xiang [SHA: 600612] closed 2.6 percent higher at CNY52.40 (USD7.23) per share in Shanghai today. However, the stock has dropped 41 percent since reaching a record high of CNY89.49 in April last year.
According to the company’s annual earnings report released yesterday, net profit fell 12 percent to CNY2 billion (USD269 million) for the year ending Dec. 31. Revenue also declined by 21 percent, totaling CNY56.8 billion (USD7.8 billion).
The company attributed the downturn to weak global economic growth, sluggish domestic demand, and rising gold prices, all of which dampened consumer interest in gold jewelry.
China’s gold jewelry consumption dropped by 25 percent to 532 tons last year compared to 2023, according to the China Gold Association. Meanwhile, gold prices surged by about 28 percent over the same period.
Lao Feng Xiang’s store expansion also fell short of expectations. As of December, the company operated nearly 5,840 outlets worldwide, including about 200 directly-managed stores, reflecting a modest increase of 10 from the start of the year. However, 170 franchise stores shut down during the same period.
Other Chinese jewelry retailers have also faced declining earnings. Hong Kong-based Chow Tai Fook Jewellery reported a 27 percent drop in same-store sales in mainland China for the final quarter of 2024 compared to the previous year. Sales in Hong Kong and Macau saw an even steeper decline of up to 32 percent, according to unaudited trading figures.
Industry experts noted that traditional jewelry retailers are facing stiff competition from online brands and emerging labels that cater to evolving consumer tastes. These newer competitors attract buyers with lower prices and more flexible marketing strategies, forcing established companies to make significant adjustments under pressure from shareholders, performance targets, and market trends.
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