Chow Tai Fook added 180 new points of sale in the 2015 financial year and says it will continue to expand despite the slip in sales.
The company now has 2257 points of sale, largely in Hong Kong, mainland China and Macau.
“While it is crucial to maintain our market leadership, we will continue to pay close attention to our point of sale strategy and make prompt revisions when necessary during unpredictable economic times,” the company said in its earnings statement.
Chow Tai Fook’s revenue decreased by 17 per cent to HK$64.277 billion in FY2015 compared to HK$77.407 billion in the preceding year. Overall same store sales declined 24.1 per cent, among which jewellery business in Mainland China and Hong Kong and Macau recorded a decline of 16.1 per cent and 32.8 per cent respectively.
The company said part of the decline was due to gold sales coming down from a high base during the 2014 year when commodity prices were unusually high.
Revenue from gem-set jewellery as a percentage of revenue increased by 5.9 per cent to 27 per cent.
Gross profit decreased by 9.8 per cent to HK$19.072 billion, but gross profit margin improved from 27.3 per cent to 29.7 per cent. As at the end of March it operated 30 eCommerce platforms, (11 more than a year earlier) including its direct website Chow Tai Fook eShop and all major third-party marketplace platforms in Mainland China, namely Tmall.com, JD.com, VIP.com, Suning.com, mei.com, and Amazon.cn.
“With an average selling price of around HK$1000, our eCommerce platforms offer a younger line of products with lower entry prices, targeting the younger customers who form a large portion of online shoppers. In response to the needs of the younger generation, some of our products are supplied exclusively on our e-commerce channels, and we are putting more emphasis on the rapidly growing mobile platforms in the coming year.”
The company also completed the acquisition of Hearts On Fire, the international brand it took over in August to boost its product range and offer. Chow Tai Fook has already opened its first Hearts On Fire store in Mainland China, in Shanghai
Chow Tai Fook says in the year ahead it will remain committed to a balanced approach of growth and return,
It plans to add a further 150-160 points of sale to its mainland China network.
“We believe room for expansion is still significant for us, as we are currently present in just 484 cities out of over 700 in the country. To ensure our new additions will fully capture market potential, we will focus on lower tier cities and rely on local expertise and professional knowledge to facilitate market entry. In addition, we will be conducting upgrades in approximately 10 per cent of our existing POS to “high-end luxury” or “elegance” style over the next three years in response to the evolving retail landscape. Most of the upgrades will happen in Tier I and II cities, where customer expectations tend to be higher.”
In Hong Kong and Macau, the emphasis will be on efficiency, as it continues to consolidate its retail network where appropriate to manage rental costs.
“Overseas market remains a strategic component in our market development plans — our vision remains that we be the trusted brand wherever Chinese consumers populate or frequently visit; we have set foot in Taiwan, Malaysia and Singapore — as well as our newest regional market: South Korea.”
Chow Tai Fook also sees significant further growth opportunity in eCommerce. “While we believe the core of our business has never been changed, this initiative intends to explore ways to extract O2O synergy and to help us stay connected with our customers, especially the younger generations, in interactive and innovative ways.”
