HONG KONG — Hong Kong-based jeweler Chow Tai Fook said net profit for fiscal year 2014 rose 9 percent, driven by strong retail sales and an improving wholesale business in mainland China.
Net profit for the year ending March 31 was 7.45 billion Hong Kong dollars, or $961 million, compared with 5.68 billion Hong Kong dollars, or $732.7 million, a year ago. Revenue rose 34.8 percent to 77.4 billion Hong Kong dollars, or $9.98 billion. Chow Tai Fook, the largest jeweler in China, said the sales growth was driven mainly by an increase in gold sales and that the wholesale growth was driven by strong inventory replenishment demand from franchisees at existing and new stores.
Slowing economic growth and a government crackdown on luxury spending has put a dent in many luxury retailers, but Chow Tai Fook — which dominates in the mass luxury market — said it expects the impact to be “just short term.”
Although the company acknowledged a decrease in the number of mainland Chinese tourists in Hong Kong and Macau as moneyed tourists are increasingly choosing other destinations, the jeweler said it is confident it can cope with the challenges by enhancing customer services. Hong Kong and Macau’s tax-free environment should also ensure that the cities continue to be popular shopping destinations.
“We are cautiously optimistic with our business outlook for the 2014/2015 financial year. With our solid foundations and competitive strengths, we are not only able to capture opportunities and optimize returns during good times but also capable of meeting challenges and weathering adversities in the face of market volatility and economic headwinds,” managing director Kent Wong said.
Medium to long-term, the company said it maintains a “positive view” because there is large demand for mass luxury jewelry and wedding-related jewelry in China, Hong Kong and Macau. In addition, youth line products and fashion jewelry are increasingly popular among young customers.
During the year, sales of gem-set jewelry made up 21.1 percent of sales while gold products comprised of 61.2 percent of revenue. Gold prices dropped in the March to June period last year, triggering a buying spree.
Chow Tai Fook’s largest market is mainland China, where it gets 54.5 percent of total revenue. The jeweler opened a net 188 points of sale in China during the year, finishing with 1,965 points of sale. Hong Kong, Macau and other Asian markets make up the remaining 45.5 percent of sales. The jeweler opened a net 7 points of sales in Hong Kong and Macau during the fiscal year for a total of 112. The company said it will continue to open a net 200 points of sales in China – mainly tier three or lower tiered cities – each year. It is taking a “flexible” approach to opening more points of sales in Hong Kong and Macau. Online sales are another area of growth, increasing by 90.7 percent during the fiscal year.