Jeweller Luk Fook says its expansion from Hong Kong into mainland China is paying off.
The company reported a 25.1 per cent decrease in sales for the six months to September to HK$7.542 billion a figure artificially skewed by the effect of the previous year’s “gold rush”. Gross profit was down just 11.1 per cent
Wong Wai Sheung, chairman and CEO said revenue and profit attributable to equity holders reached the second highest in interim record, beaten only by last year’s ‘gold rush’.
“Under the high base effect last year, overall gross margin improved with successful strategies on increasing mix of gem-set jewellery products. We have also successfully expanded business from Mainland China, which is a strategic move to lower reliance on Hong Kong & Macau market.”
In order to boost the sales of gem-set jewellery products, Luk Fook enhanced the in-store displays of gem-set jewellery products in mainland China.
With the completion of the acquisition of 50 per cent of China Gold Silver Group, a jewellery retailer and franchisor trading under the brand 3D-Gold, Luk Fook became one of its suppliers.
While mainland China is growing in importance for the group, the Hong Kong market contributed about 60 per cent of its total Chinese revenue. China contributed 25 per cent and Macau 15 per cent.
In the six months, Luk Fook opened 65 shops in Mainland China and closed one.
It’s global network as at September 30 was 1333 shops – in Mainland China, Hong Kong, Macau, Singapore, the US, Canada and Australia.
Wong Wai Sheung said his company is “cautiously optimistic” about the second half of the financial year and the mid- to long-term.
“The international gold price dropped recently, touching a four-year low in early October and November. Coupled with the “double spring” and a “leap month” in Chinese calendar this year, a good season for weddings will benefit sales of gold products and in turn likely trigger another small scale ‘gold rush’.”
He said the Occupy Central protests and slowing consumer sentiment had caused a single digit drop in October sales.
“Nevertheless, with the continuously low gold price, November 2014’s sales are picking up with its growth momentum.”
