HONG KONG — Chow Tai Fook, the largest jeweler in China, said Thursday that net profit for the six month period ending in September declined by 33 percent due to slower sales in China, losses from gold hedging and higher operating costs.
The company posted a net profit of 1.82 billion Hong Kong dollars, or $234 million, down from 2.69 billion Hong Kong dollars, or $347 million, a year ago. Revenue rose 6.5 percent to 25.44 billion, or $3.28 billion, fueled by the jeweler’s growing retail network. Overall same store sales declined by 1.7 percent as weak consumer sentiment in Hong Kong, Macau and Taiwan slowed sales and caused a 6.3 percent drop in same store sales.
The first half of the year was “full of challenges,” Chow Tai Fook’s chairman Henry Cheng, said in a press conference Thursday, “the group still generated steady growth despite market adversity,” he said.
Looking ahead, Cheng said that macroeconomic uncertainties could continue to affect the company’s outlook for the short term. “Yet we see some positive signs in the retail market and believe that Hong Kong and mainland China’s luxury spending will pick up gradually.”
Chow Tai Fook has continued its aggressive expansion plan in China, with a focus on their tier two, three and lower tiered cities. Company executives said they remain optimistic about the company’s goal open increase its point of sales network by 200 new locations a year to 2,000 by the end of fiscal year 2014. Nearly 95 percent of Chow Tai Fook’s point of sales are in mainland China, contributing 55.2 percent of the company’s total revenue. Executives also said they remain optimistic the company will be able to double sales by fiscal 2015.
Gross margin declined to 26.4 percent from 29.9 percent a year ago mainly because of gold hedging losses. Chow Tai Fook, which gets 55.5 percent of sales from gold and gold jewelry items, hedges the commodity risk of gold through short positions such as gold loans and bullion forward contracts. The company said that the hedging positions should cancel out over time through the sales of gold products, but that there was a “short timing difference” as the cost of gold increased rapidly in recent months, cutting into profit margin.
The company said it would be changing its gold hedging policy, relaxing its hedging level from almost fully hedged to about 70 percent of total gold inventories. This change, the company said, was due to the increasing scale of gold hedging activities and the potential change of regulations regarding hedging instruments in mainland China.
Sales of gem-set jewelry rose 2.4 percent to make up 22.7 percent of total sales while sales of gold products increased 11.3 percent. Sales of watches decreased from 7.7 percent of total sales to 5.9 percent. Though gold sales make up the majority of sales, Chow Tai Fook has been marketing gemstone and diamond jewelry because the other categories have higher profit margins and higher price points. The unfavorable economic climate though appears to be squeezing customers and the company said both local and mainland Chinese customers in Hong Kong and Macau switched spending to from high-end luxury pieces to mass luxury products with an average selling price of 2,000 Hong Kong dollars, or $258, to 100,000 Hong Kong dollars, or $12,903, and tended to spend on jewelry items for special events such as gold wedding jewelry.
Chow Tai Fook warned on Friday last week that profits for the first six months of the fiscal year would be lower than last year, causing shares of the company to fall by 5.6 percent. Shares are now trading about a third below its initial public offering price from December 2011.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)