Luk Fook's Profit -23%, Sales +7%

Luk Fook Holdings reported that its profit fell 23 percent year on year to $72.3 million (HKD 560.2 million) during the six months that ended on September 30, 2012. The decline in net income came as costs rose and despite an increase in sales of 7 percent year on year to $764 million (HKD 5.92 billion). The Hong Kong based jeweler noted that cost of sales rose 12 percent to $599.3 million (HKD 4.64 billion) due to a disproportionate increase in Hong Kong and Macau rentals, staff costs and store renovations that it carried out, Rapaport reported.
At the end of the period, Luk Fook operated 36 stores in Hong Kong and eight in Macau where combined revenue rose 4 percent to $560.8 million (HKD 4.35 billion). Growth was impacted by a slowdown in visitor arrivals from Mainland China, the company explained.
Revenue from its operations in Mainland China, which included 857 licensed stores and 77 self-operated shops, grew 47 percent to $52.7 million (HKD 278.5 million). Management noted that local consumption in China remained stable despite a weaker economic environment, while the steady demand for luxury products has led to the group’s fast expansion in China through its licensing business model.
Luk Fook projected that its Mainland China business will continue to drive growth as it expects the government to introduction  various economic stimulus policies coupled with ever-rising disposable income to spur further development in the domestic consumer market.
Revenue from the group’s wholesale division increased 12 percent to $122.4 million (HKD 948.7 million) and revenue from its licensing business grew by 10 percent to $28.1 million (HKD 217.4 million).