HONG KONG — It was another tough quarter for Hong Kong-based jeweler Chow Tai Fook.
The jeweler said Friday its retail sales for the third quarter ended Dec. 31 fell 11 percent. Sales in mainland China fell 6 percent while those in Hong Kong and Macau plummeted 20 percent.
In same-store terms, Chow Tai Fook said its group sales fell 15 percent. Breaking down those comps further, the company said same-store sales of gem-set jewelry fell 12 percent while those of gold products fell 14 percent.
In November, Chow Tai Fook said its first-half net profit plunged 42.2 percent amid a sluggish retail environment in Hong Kong.
Its outlook was rather downcast even with the upcoming Chinese New Year, which begins on February 8. The holiday is usually a boom time for retailers as the tradition requires people give gifts to each other.
“If we take the performance of January and February as a whole, it will be about the same as the third quarter. That means still challenging,” Kent Wong said.
The holiday follows the lunar calendar and as a result, can fall anytime during the first two months of the western year. Most businesses look at sales from the two months together to smooth out seasonality.
“We believe China will still better perform than Hong Kong as it has been doing,” he said.
Later Wong referenced the turmoil the Chinese stock market has seen in the past few days saying he believes it will affect consumer sentiment but it was hard to estimate by just how much.
Finance director Hamilton Cheng said the strength of the Hong Kong dollar [which is pegged to the U.S. dollar] was also adding pressure.
It made Hong Kong less attractive overall as a shopping destination for Mainland tourists and what sales did take place in mainland China is reported in Hong Kong dollars on their balance sheet.
The jeweler is keeping a tight rein on its store network to manage costs and is expecting to close “around five or six stores” across Hong Kong and Macau in the coming quarter.
“Rent in the first half of the financial year was over 8 percent of total expenses in Hong Kong and Macau,” Cheng said. “We hope it will be 6 percent or it will reduce the 2 percentage points or by more. If looking at the group as a whole, the cutbacks would save about 1 percentage point of costs.”