HONG KONG — Chinese jeweler Chow Tai Fook on Wednesday warned that its half-year net profit may fall by up to 50 percent, blaming a weak general retail environment in Hong Kong and lowered margins from increased gold product sales.
Net profit for the six months ended Sept. 30 is expected to decrease by about 40 percent to 50 percent compared to the same time last year, the company said.
The decrease is mainly attributable to the muted retail sector in Hong Kong and Macau, it said, and reduced gross profit margin due to higher gold product sales and an unrealized hedging loss on gold loans for the period, which the year before had been an unrealized hedging gain.
The company revealed last month that the ratio of gold product sales reached 57 percent in the second quarter, up 8 percentage points thanks to the tumble in the price of gold starting in mid-July, while gem-set jewelry accounted for 26 percent.
Overall Hong Kong retail sales in September fell for the seventh consecutive month to a total of 35.2 billion Hong Kong dollars, or $4.54 billion, a decline of 6.4 percent year-on-year.
Jewelry and watches sales in Hong Kong declined 22.9 percent for the month, widening significantly from the 8.8 percent fall in August.
Retailers will start to benefit from a lower base effect starting from late September due to the Occupy Central protests last year.
Barclays is anticipating slow sales growth in Hong Kong to linger over the next few years. A Nov. 2 note from the bank said it expects “the higher-spending visitors to continue to travel to other destinations, particularly where currencies have depreciated” and that “Hong Kong’s product pricing advantage could diminish if the U.S. dollar stays strong and if China removes more import tariffs or consumption taxes for more goods.”