HONG KONG — Chinese jeweler Chow Tai Fook said its first-quarter retail sales declined 6 percent year-on-year, in line with market expectations, as business in Hong Kong and Macau continued to be weak.
Mainland retail sales were flat for the quarter ended June while Hong Kong and Macau fell 16 percent from a year ago, the firm said. Same-store sales fell 15 percent — down 7 percent in Mainland China and negative 24 percent in Hong Kong and Macau. The company did not release sales figures, just percentage changes.
Managing director Kent Wong said that despite the decline, both markets showed signs of stabilization.
“On the mainland, we hope that the next half of the year will go back to growth and Hong Kong and Macau to narrow the decline to high-single digits,” he said during a conference call.
The group is planning to close four stores in Hong Kong this year and will renegotiate rents to ease costs. It opened just one outlet in Macau during the quarter at the new Galaxy casino resort and none in Hong Kong.
On the mainland, it opened 22 stores — all jewelry outlets — while closing 10 watch stores, bringing the group’s total store count to 2,270 at the end of June. The pace of expansion has slowed considerably. Last year over the same quarter, the group opened 46 stores. They are expecting to open around 150 new stores over the coming financial year compared to the 200 or so per year historically.
“There are no plans to open more in Hong Kong or Macau unless there is really attractive rent,” Wong said.
The two cities, which heavily depend on Mainland Chinese customers, have seen business drop off as Chinese travel further abroad for their purchases and the effects of the anticorruption campaign linger.
“It looks like it’s in line with the market. Obviously it’s bad results but it’s expected,” CLSA consumer analyst Mariana Kou said. “What’s kind of interesting is that they closed 10 watch stores in China…confirming that watches are struck more by the anticorruption campaign compared to jewelry.”
Kou added that Chow Tai Fook shouldn’t be too affected by any weakened consumer sentiment due to China’s extremely volatile stock market. Both the Shanghai and Shenzhen composite indexes have lost around a third of their values in the past month.
“[It] seems to be impacting the luxury end more than the mid-end. Chow Tai Fook is quite a midmarket play so we’re not too concerned about the wealth effect,” she said.