Sales at Hong Kong-based jeweler Luk Fook experienced a significant decline in the second fiscal quarter due to soaring gold prices and a continuing decrease in diamond demand.
The company reported a 16% drop in total sales for the three months ending September 30 compared to the same period last year. Same-store sales, which measure sales at self-operated shops open for at least a year, fell by 35%.
Luk Fook attributed much of the downturn to a 29% increase in gold prices during the quarter. This rise weakened consumer sentiment toward gold. The company also faced challenges due to a strong comparison period from the previous year when luxury goods sales surged after the reopening of the border between Hong Kong and China, allowing consumers to travel and shop.
“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 stated. The average international gold price rose by 29% year-on-year during the quarter, further weakening consumer interest.
In Hong Kong and Macau, sales fell by 31%, while sales on the mainland decreased by 13%. Same-store sales of gold, priced according to international market rates, dropped 38% year-on-year. In contrast, same-store sales of fixed-price jewelry, determined by the retailer, decreased by 24%. However, same-store sales of fixed-price gold products rose by 11%, while sales of fixed-price diamond items plummeted by 45%.
Same-store sales of gold products fell by 41% in Hong Kong and Macau and 27% in China. Fixed-price diamond jewelry saw a 47% decline in both regions.
Despite the decline, Luk Fook has observed an increase in gold product sales since the beginning of the third fiscal quarter. However, diamond sales remain weak.
“The decline in same-store sales has narrowed since September,” the company explained. “From October 1 to 14, the overall same-store sales performance showed some improvements compared to the second quarter. Although the temporary spike in gold prices may affect sales, an increase in profit margin will help mitigate the impact of the sales decline. We expect gold product sales to return to normal levels as consumers adjust to higher gold prices. Meanwhile, with diamond demand still low, we will continue promoting non-diamond fixed-price jewelry products.”
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