Luxury Jewellery Brand Chow Tai Fook Report 42% Net Drop, China Slowdown Weakens Luxury

Published Date : Nov 25, 2015

The largest publicly traded jewelry chain in the world, Chow Tai Fook Jewellery Group Ltd., has reported that its profit in the first half of the year plunged by 42%, amidst dwindling demand in Macau and Hong Kong. The economic slowdown in China has weakened the sales of luxury retailers, as stated by a company spokesperson.

The net income dropped to HK$1.56 bn for the first six months of the financial year that ended in September as compared to HK$2.69 bn for the same period last year, as stated by the jeweler recently. The company warned that its Nov. 10 profit will drop as much as 50% due to weakened sales in the two cities, losses due to unrealized hedging, and increased sales of gold products that have lower margins.

Chow Tai Fook and some other high-end jewelry retailers will continue with their plans to close down unprofitable shops in Hong Kong, with the market grappling with crackdown of corruption in China, stock market volatility, and economic slowdown, as stated by Michael Cheng, who is the leader for retail and consumer for the Asia Pacific region at Pricewaterhouse Coopers LLP.

This is in contrast to the fast-paced expansion strategy that retailers were employing during the peak growth period from 2009 to 2012. The executive at Pricewaterhouse Coppers reiterated that the retailers need to reduce the number of shops in order to optimize their operations. Another Hong King based jewelry retailer, Luk Fook Holdings International Ltd., has warned a 40% drop in year-on-year profit as recorded in November.

Burberry Group Plc., the luxury retailer from U.K., earlier said that it is scaling back two of its biggest stores in Hong Kong. Likewise, Louis Vuitton, which is part of the LVMH Moet Hennessy Louis Vuitton SE Group of France, said that it is reviewing eight stores in second-tier cities in China whether to continue or close down.