HONG KONG — Chow Tai Fook’s first-half net profit plunged 42.2 percent to 1.56 billion Hong Kong dollars, or $200.9 million at average exchange rates, compared to the same period last year amid a sluggish retail environment in the city.

Revenue for the six months ended Sept. 30 decreased by 4.1 percent to 28.12 billion Hong Kong dollars, or $3.63 billion dollars, year-on-year. Overall same-store sales declined by 8.7 percent.

The poor results come as little surprise. The company issued a profit warning on Nov. 10, and the retail sector in Hong Kong, reliant on Mainland Chinese shopper demand has been flagging of late. Like many other brands operating in the region, Chow Tai Fook has slowed its expansion opening only 29 outlets during the period for a total of 2,286 stores as of September 30. Finance director Hamilton Cheng said that the group plans to open about 60 stores in this fiscal year, down from its original target of 150 to 200 stores a year.

Just last week, another major brand, Burberry, said it would significantly scale back the size of its flagship in Hong Kong by giving up one floor of the boutique due to the challenging environment.

Last month, the death of a mainland Chinese shopper at a jewelry store generated negative publicity for the sector.

A 54-year-old man died after being involved in an altercation with a tour guide while on a “forced shopping tour,” in which the tour guide makes a commission off of the tour group’s purchases. Although arrests were made, the incident has dented Hong Kong’s desirability as a shopping destination.

Despite the fact that the death may have impacted tourist flows to the city, Chow Tai Fook chairman Henry Cheng said closer regulation of these shopping tours could be a long-term positive. “I think that forced shopping has a big impact on the Hong Kong. If you change it, it is better for the industry,” he said.

load comments
blog comments powered by Disqus