A shift in focus away from the high end has partly buffered jeweller Tse Sui Luen from the Hong Kong luxury downturn.
The group has released trading figures for the first half year revealing a decrease in turnover of just 3.6 per cent to HK$1.753 billion. While the decline was attributable to the slump in Hong Kong luxury retailing and the reduced spending by Mainland tourists, Tse Sui Luen defied the downward sales trend thanks to strong growth in its Mainland China franchise business.
Nevertheless, the profit attributable to owners of the company declined by 40.2 per cent from HK$25.8 million to HK$15.5 million.
“Due to the growth in our high-end luxury segment in China slowing down, we shifted our focus to the development of the self-consumption market and high craftsmanship gem-setting jewellery in the premium mass market,” explains chairman and CEO Annie Yau Tse.
“Thanks to the right strategy and an expanded franchise network, we saw the same store sales growth from Mainland China was 2.3 per cent while the whole business grew by five per cent in the region.”
Tse says the company’s sales in Malaysia grew by 14 per cent in the first half year prompting plans to open one or two more retail stores in the market during the forthcoming year.
In Hong Kong and Macau, says Tse, the number of tourists from Mainland China dropped in the first half and their spending on luxury products and higher-priced gifts decreased. Instead of buying luxury goods, these customers turned towards more popular commodities in the mass markets.
“As a result, the sales in Hong Kong and Macau for the period under review decreased by 19 per cent and same store sales growth was minus 20 per cent.”
Despite the challenging market, the group opened two new stores in Hong Kong – one in Olympian City and the other in Plaza Hollywood, Diamond Hill in the first half. Another two new stores located in Tuen Mun and Wong Tai Sin were opened in October – aimed at local consumers who are end users in the self-consumption product segment.
Tse Sui Luen says easing retail rents have resulted in a three per cent drop in the group’s rent spend for Hong Kong and Macau shops in the First Half.
In Mainland China the group plans to increase the pace of store openings in order to better serve its customers. As of August 31, it had 169 self-operated stores and 56 franchised stores. By October 29, that had grown to 175 and 65 respectively, spread across 80 cities. The group plans more than 100 stores in Mainland China during the next two years.
Tse believes the current market fluctuations in China and Hong Kong-Macau are “cyclical and transitory”.
“In order to facilitate a more rapid growth of the group’s franchise sales network in Mainland China, we will continue to explore more opportunities to work with local business partners. We also expect our e-business channel to maintain its high growth rate in the second half of this year. We are cautious but confident that based on our solid foundation and the business know-how our experienced management team possessed, we will be able to mitigate the challenges of this cyclical downturn and create value for our shareholders.”
