Hong Kong-based jeweler Luk Fook has closed 175 stores across China and Hong Kong in the first half of its fiscal year, citing a decline in revenue and profits due to rising gold prices.
The company reported a 27% drop in group revenue, which fell to HKD 5.45 billion ($700.2 million) for the six months ending September 30. Net profit also plummeted by 56%, dropping to HKD 417.2 million ($53.6 million), largely due to gold hedging during this period.
Sales were further impacted by weak demand for diamond jewelry. The company’s performance was also compared to a strong period last year when Hong Kong’s luxury sector benefited from the reopening of its border with mainland China.
Sales in Hong Kong, Macau, and other international markets decreased by 27% to HKD 3.51 billion ($451.4 million). Same-store sales fell by 35%, with gold and platinum products dropping 37%, and fixed-price jewelry, including diamonds, down by 30%. In mainland China, sales also slumped by 27%, amounting to HKD 1.94 billion ($248.8 million).
However, the company saw an improvement in sales starting from the third fiscal quarter. Luk Fook emphasized that it would focus more on gold jewelry, given the weak demand for diamonds.
“Fortunately, the decline in same-store sales in both mainland China and Hong Kong markets has narrowed since September,” the company said. “From October 1 to mid-November, the overall same-store sales showed improvement compared to the second quarter. Although higher gold prices may impact sales, increased profit margins are expected to offset the decline. We anticipate that gold product sales will return to normal levels as consumers adjust to the high prices. Meanwhile, given the continued subdued demand for diamonds, the company will continue promoting non-diamond fixed-price jewelry.”
Related topics:
- $5M Cartier Diamond Necklace Smashes Pre-Sale Estimate at Christie’s Auction
- KP Members Need to Redefine Conflict Diamonds
- Phillips Highlights 43ct. Yellow Diamond
