An employee touches gold bangles as they sit in display inside a Chow Tai Fook Jewellery Group Ltd. jewelry store
Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewelry chain, said same-store sales in Hong Kong and Macau plunged 23 percent in the final three months of 2015 as fewer mainland Chinese tourists visited the two cities.
Same-store sales, for outlets open at least a year, fell 6 percent for those in mainland China, bringing the total decline to 15 percent for the fiscal third quarter ending December, the company said in a statement Friday. The retail sales value for all of the company’s outlets slumped 11 percent in the period, it added.
The operating environment in China as well as sales outlook for the Lunar New Year holidays in February remain challenging, and the company will continue to focus on cost-cutting measures in the rest of the current fiscal year ending March, Managing Director Kent Wong said on a conference call with reporters Friday.
“The retail jewelry industry is now in a consolidation stage after the rapid growth in the past decade,” Wong said. “What we can do now is to better control cost structure on both rentals and staff costs, while expanding our high-end product lines.”
Chow Tai Fook in November declared its first-ever special dividend even as it posted the steepest decline in semi-annual profit since it went public, after its shares fell to about 70 percent before its offer price since its 2011 share listing. China’s economic slowdown, as well as campaigns against corruption and extravagant spending have hurt luxury retailers and casino companies.
The retailer of gems and watches has said it will shut outlets that do not perform well, but doesn’t plan to lay off workers. Still, the number of employees may fall further after it dropped 8 percent in the first half, reducing staff costs by 13 percent, Wong said Friday.
Chow Tai Fook Chairman Henry Cheng said in November the company has shelved its overseas expansion plans and will focus on the Hong Kong, Macau and mainland China businesses.
Mainland Chinese tourists to Hong Kong, who accounted for more than 70 percent of the total in November, have dropped 16 percent in the month, according to the city’s tourism board.
Chow Tai Fook may request rental reductions of 30 percent on average, for the roughly one-third of its Hong Kong stores that renew their lease agreements each year, it had said in November. Wong said the company is in talks to renew leases for three shops in the city.
The luxury chain’s retail network expanded to 2,317 points of sales as of end-2015, including a net opening of 28 jewelry, and 2 watch outlets in mainland China. It will open between 50 to 60 points of sales in China in the rest of the fiscal year, Wong said.
Competitor Chow Sang Sang Holdings International Ltd. said it won’t cut prices even as it expects same-store sales to slide during the Lunar New Year holidays, amid a strong Hong Kong dollar that has turned mainland tourists away, the Standard newspaper reported Friday citing Lau Hak-bun, the company’s general manager of Greater China retail.
Chow Tai Fook’s Wong also said the company has no plan to cut product prices in the future. Daryl Loo and Foster Wong, Bloomberg
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