Luk Fook sales fell 8.7 per cent to HK$12.8 billion (US$1.6 billion) for the year to the end of March.

Nevertheless, the sales mix of gemset jewellery products, which were at a relatively higher gross margin, increased as a result of slowdown in demand for gold products. Together with the improved gross margin of both gold and gemset jewellery products, the jewellery group’s overall gross margin improved by 2.4 points to 25.6 per cent.

This mean gross profit also improved, by 0.7 per cent to $3.27 billion, despite the drop in revenue. The profit attributable to equity holders rose 6.1 per cent to $1.02 million.

During the year the group added 68 shops to its worldwide network, including 64 Lukfook shops in Mainland China, one shop in New York and two in Kuala Lumpur, as well as reopening a licensed shop in Seoul.

At the end of the year the group had a global network of 1505 shops, up from 1437 a year previously, including 1496 Lukfook shops (2016: 1428) and nine 3D-Gold shops in China (unchanged). There were three shops in the US, two in Canada, and one each in Australia and Singapore.

Overall same-store sales growth for the year was down 18.3 per cent (2016: -19.3 per cent).

Watch business

Since 2010, the group has been involved in the mid- to high-end watch business, and at the end of March was the authorised dealer of 36 brands including Audemars Piguet, Bulova, Burberry, Bvlgari, Emporio Armani, Eterna, Frederique Constant, Longines, Omega, Oris, Rado, Tag Heuer, Tissot, Victorinox Swiss Army and Wenger. This business contributed $211 million in revenue this year (down from $247.8 million the previous year), representing 1.6 per cent of total revenue.

While the market Hong Kong started to stabilise and has improved, the group says its revenue there fell by 19.4 per cent to $6.2 billion. At the end of the year the group had 47 shops, unchanged from the previous year.

With a better business environment in Macau than Hong Kong, the group’s retail revenue turned to positive growth of 5.4 in the second half of the year from a 27.7 per cent drop in the first half. This resulted in a decrease of only 11.9 per cent for the year’s revenue to $1.5 billion.

At the end of the year the group had 10 shops in Macau (unchanged).

Retail revenue from China grew by 26.5 per cent to $1.6 billion because of an increase in shops. At the end of the year the group had 1429 outlets under the Lukfook brand, up from 1365. This included 133 self-owned shops (up from 105) and 1296 licensed shops (1260).

Of the new self-owned shops, 23 were opened by a JV with a licensee, with the group holding 51 per cent equity (there were 14 of these shops last year).

E-commerce revenue in China burgeoned by 97.4 per cent to $182 million, accounting for 11 per cent of the group’s retail revenue in China (7 per cent the previous year).