Hong Kong-based jeweler Tse Sui Luen (TSL) reported a loss in the first fiscal half amid economic challenges in China and dwindling demand for diamond jewelry.
The company’s net loss came to HKD 58.3 million ($7.5 million) for the six months that ended September 30, compared with a profit of HKD 1.8 million ($230,000) a year ago, TSL said last week. Sales for the period rose 8% to HKD 1.35 billion ($172.8 million).
Revenue in mainland China, TSL’s biggest market, decreased 3.2% to HKD 870.6 million ($111.7 million) as consumers tightened their budgets in light of the challenging economy. The company also sold more gold products as diamond demand dropped.
“Affected by international economic concerns and China’s property sector challenges, consumers are more conservative in their spending,” the company stated. “The Chinese government has rolled out measures to bolster consumer confidence and speed up economic recovery, which has led to some improvement in retail sales. Riding on the uptrend of pure gold demand, the group has focused more on [that] business to partially compensate for the loss of sales caused by the sharp decline in diamond demand.”
In Hong Kong and Macau, sales surged 41% to HKD 407.5 million ($52.3 million) as the municipality saw a steady rebound in tourism following the reopening of its border with mainland China. The company also benefited from the Hong Kong government’s distribution of new stimulus vouchers, as well as large-scale campaigns to stimulate the economy.
“These government initiatives helped the group to achieve a notable increase in the turnover of its Hong Kong and Macau retail business,” Tse Sui Luen added.
Hong Kong retail sales continued to gain speed in July as tourists flocked back to the municipality and the job market improved.
Hong Kong retail sales from jewelry, watches, clocks and valuable gifts climbed 20% year on year to HKD 4.95 billion ($632.9 million) for the month, according to data the government’s Census and Statistics Department released last week. Retail sales across all product categories rose 17% to HKD 33 billion ($4.22 billion).
The growth also reflected a favorable comparison with the same period a year ago, when Hong Kong was experiencing tight Covid-19 restrictions. Tourism to the municipality was exceptionally low at the time. Much of Hong Kong’s luxury revenue is derived from visitors — primarily from China — who travel there to purchase goods. Hong Kong’s border with the mainland reopened at the start of the year.
For the first seven months, proceeds from jewelry, watches, clocks and valuable gifts surged 64% to HKD 35.36 billion ($4.52 billion). Total retail sales for the period jumped 20% to HKD 238.05 billion ($30.43 billion).
In July, 3.6 million visitors arrived in Hong Kong, compared to 48,048 during the same month last year. Of those who traveled to the municipality in June, 3 million were from the mainland, versus 40,083 in 2022.
“The value of total retail sales continued to increase visibly in July over a year earlier alongside the increase in visitor arrivals and positive consumption sentiment,” a government spokesperson said. “The revival in inbound tourism should continue to benefit the retail sector in the coming months. Improved labor-market conditions and the government’s various measures to support consumption should also help.”
Luk Fook’s same store sales dropped 10% in the third fiscal quarter amid economic weakness in greater China.
The depreciation of the Chinese yuan against the Hong Kong dollar led customers to purchase cheaper products in the three months ending December 31, the retailer said Thursday.
Luk Fook, one of Hong Kong’s largest jewelers, derives a significant proportion of its revenue from tourists visiting the municipality from the mainland. The weakening of the yuan during 2018 reduced the purchasing power of those consumers, causing same store sales at branches open for more than a year to fall 9% year on year in Hong Kong and Macau. Same store sales in mainland China slid 14%.
“The recent market sentiment was adversely impacted by the US China trade war, the depreciation of the yuan , and the downward pressure in the stock and property markets,” the company added.
Same-store gold sales in Hong Kong and Macau dropped 9%, while gem set jewelry purchases fell 8%. The currency effect led to a double digit decline in the average selling price of gem set products, the jeweler noted.
In China, same store sales of gold products plunged 16%, while sales of gem set jewelry decreased 5% for the period.
Luk Fook’s results are for its self operated stores, and exclude licensed shops, which form the majority of its stores on the mainland.
