Retail sales at Hong Kong based jeweler Luk Fook soared in the third fiscal quarter as tourism recovered and the price of gold surged.
Sales grew 46% year on year for the three months that ended December 31, 2023, the company said last week. The rise comes on the back of a mounting revival in visitor traffic to the municipality since early last year, when the border reopened as the latest Covid-19 restrictions eased. Sales were up 40% compared to the same period of 2019, prior to the start of the pandemic.
“Following the complete reopening of borders among Hong Kong, Macau and the mainland, the Hong Kong and Macau market has shown a sustained recovery,” the company reported. “Despite an annual rise of over 14% in the average international gold price overall same store sales for gold products still displayed significant growth of 80%.”
In Hong Kong and Macau specifically, retail sales spiked 97%, with same-store sales those at branches open for at least a year gaining 80%. On the mainland, those figures increased 37% and 18% respectively.
Same store sales of gold products jumped 94% in Hong Kong and Macau, as the rising price of gold led to higher value transactions. In that category, fixed price gold jewelry as opposed to gold sold by weight rose 88%, while diamond-set jewelry went up 25%.
In China, same store sales of gold products advanced 22%. Fixed priced gold jewelry was up 23%, somewhat offsetting a 35% drop in diamond-set jewelry.
Hong Kong-based jeweler Luk Fook saw sales rise in the second fiscal quarter as tourists returned to the municipality in search of luxury items.
Same-store sales — at self-operated shops open for at least a year — jumped 31% for the three months ending September 30 compared with the same period a year ago, the company reported Wednesday.
Hong Kong’s border with the mainland reopened to tourists in January, while the territory’s government removed local restrictions. The municipality derives much of its luxury revenue from visitors — primarily from China — who travel there to purchase goods.
The retailer also attributed the growth to strong sales over the National Day Golden Week holiday as well as its decision to carry a greater proportion of gold products, which are more popular than diamond jewelry.
“Given the decreased demand for diamond products [on the] mainland, the group will continue to actively promote non-diamond fixed-price jewelry products, especially fixed-price gold products, in order to improve…performance,” it said.
The 41% increase in Hong Kong and Macau outweighed an 8% dip on the mainland resulting from a challenging economic situation and subdued consumer sentiment, the company explained.
Luk Fook’s same-store sales of gold — priced by weight at international market rates — grew 30% year on year during the quarter, while “fixed-price jewelry,” which refers to products sold at prices determined by the retailer, was up 36%. Overall, sales of fixed-price gold products increased 76%, while fixed-price diamond goods rose 19%.
“Since the full reopening of borders amongst Hong Kong, Macau and mainland…the Hong Kong and Macau market has shown consistent improvement,” Luk Fook noted. “The macroeconomic in the mainland market showed no signs of improvement and its consumption sentiment exhibited a slower recovery compared to the Hong Kong and Macau market…. This year marked the first National Day Golden Week after the return to normalcy following the pandemic. During this Golden Week period…the Hong Kong and Macau market sustained growth momentum.”
Luk Fook’s same-store sales fell 37% in the second fiscal quarter amid protests in Hong Kong and the continued impact of the US-China trade war.
Total same-store sales — at Luk Fook outlets open for more than a year — in Hong Kong and Macau dropped 39% in the three months ending September 30. Same-store gold sales plunged 46%, while gem-set-jewelry purchases slid 26%. The figures are for shops the jeweler operates itself, excluding franchises.
The decline was the “result of high gold prices, high base effect, together with the substantial decline in the number of visitors to Hong Kong due to recent ongoing social activities,” the company noted. “Both the sales volume and average selling price of gem-set jewelry products saw a double digit drop.” Luk Fook is negotiating its rental agreement with all of its landlords in Hong Kong to avoid having to cut jobs, it said.
Overall same-store sales in mainland China slipped 25%, with revenue from gold products falling 28% and gem-set jewelry dropping 18%. While stores in mainland China showed some improvement in the first two weeks of October, sales in Hong Kong and Macau declined even further after the close of the quarter, as the tourism rate to the area continued to descend, the retailer noted. The most recent figures, reported for August, showed a 42% drop in mainland visitors to Hong Kong, according to data from the Hong Kong Tourism Board.
At the end of the quarter, Luk Fook had 210 self-operated stores, of which 136 were in mainland China, 51 in Hong Kong, 12 in Macau and 11 in other locations. The retailer also has 1,745 licensed shops.
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.
