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Jeweller Luk Fook sees early signs of recovery in Hong Kong retail

Hong Kong-listed jeweller Luk Fook has reported early signs of a recovery in the Hong Kong market this month, despite the border with Mainland China effectively remaining closed to visitors.

In April and May, with tourist numbers to Hong Kong and Macau at a record low due to Covid-19 related travel restrictions, sales fell by about 80 per cent, although same-store sales in mainland stores recorded “a much smaller decline” as retail stores resumed business and consumer sentiment began to recover.

“Starting from June, the retail sentiment in the Hong Kong and Macau market gradually recovered,” said chairman and CEO Wai Sheung Wong in a commentary on the groups’ annual results filed Friday. 

“The decline of same store sales in the first three weeks narrowed to around 60 per cent, while overall shops in the mainland market showed progressive improvements with a less than 20-per-cent decline in June as compared to the 20-per-cent drop in April to May and 40-per-cent drop in March.”

As a result of Hong Kong’s declining retail market, Luk Fook will close five stores in the city during the coming year and look for opportunities to open two in Macau.

“In view of the anticipated considerable growth of the middle-class population in the mainland, the group remains optimistic about the mid- to long-term business prospects, and will focus its expansion in the mainland market,” said Wong.

Due to the crippling impact of protests and Covid-19 on Hong Kong retail in the year to March and the pandemic along with the trade war impacting consumer sentiment among mainlanders, Luk Fook achieved a profit attributable to shareholders down 42 per cent to US$111.7 million for the year.

Sales declined by 29.2 per cent to $1.445 billion, with Hong Kong and Macau same-store revenue down by 33.3 per cent and on the mainland by 20.2 per cent. However, a steady rise in the price of gold throughout the year saw the company’s gross margin increase by 4.2 percentage points to 29.6 per cent. 

Network expansion

During last year, Luk Fook added a net 234 Lukfook-branded shops – 233 on the mainland, and one licensed store in the Philippines – taking its global network to 2120. Outside Greater China, Luk Fook has stores in Singapore, Malaysia, Cambodia, the Philippines, the US, Canada and Australia. 

The company says it plans to open at least 150 new stores under the Lukfook brand on the mainland this year, primarily targeting licensed shops in tier-4 and tier-5 cities, and another 50 under other brands.

Besides jewellery, the company is now an authorised dealer of 13 international mid- to high-end watch brands: Certina, Coinwatch, Doxa, Enicar, Hamilton, Longines, Mido, Omega, Rado, Romago Swiss, Tissot, Bijoumontre and Seiko.  Last year, the watch business accounted for $12.86 million in sales, down 39.8 per cent on the prior year.

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