Hong Kong-based jewellery company Luk Fook was forced to close 175 stores in China and Hong Kong as rising gold prices hit revenue and profit, the company said in its first-half financial results for the year ended September 30.
Sales were also hit by weak demand for diamond jewellery, with group revenue down 27% year-on-year to $700.2 million for the six months. Net profit fell 56% to $53.6 million as a result of gold hedging during the period.
Sales in Hong Kong, Macau and overseas fell 27% year-on-year to $451.4 million for the period. Like-for-like sales fell 35%, with gold and platinum jewellery falling 37% and fixed-price jewellery, including diamonds, falling 30%. Sales on the mainland fell 27% to $248.8 million.
Sales began to pick up at the start of the third fiscal quarter. However, the company remains committed to prioritising gold jewellery over diamonds.
In October-November, the group’s overall comparable sales performance showed an improvement over the second fiscal quarter. While the jump in gold prices could weigh on sales, the increase in profit margins will help cushion the impact of the sales slowdown. Gold jewellery sales are expected to return to normal levels once consumers adjust to high gold prices. Moreover, as demand for diamond jewellery remains muted, the group will continue to aggressively promote non-diamond fixed-price jewellery, the company said.
Hélène Tarin, Editor-in-Chief of the Asian Bureau, Rough&Polished
