HONG KONG — Chow Tai Fook Jewellery Group said it is exploring opportunities in Asian markets outside China to follow mainland Chinese tourists traveling further abroad as it reported annual profit fell 25 percent from a year ago dragged down by weak sales in its core market Hong Kong.
“We explore markets that have a lot of Chinese tourists,” executive director Adrian Cheng said. “ It really depends on where the Chinese tours are going. That’s why we opened in Shilla Duty Free in Korea. We have a good partner…and it’s been doing very well too.”
Profit for the year ended March was 5.46 billion Hong Kong dollars, or $704 million, compared to a consensus of 5.9 billion Hong Kong dollars, or $761 million, expected from a poll of 23 analysts compiled by Bloomberg. Revenue was 64.28 billion Hong Kong dollars, or $8.3 billion, down 17 percent from a year ago.
Chow Tai Fook’s business heavily relies on Mainland Chinese tourists who come to Hong Kong and Macau to shop. Nearly three quarters of its stores in Hong Kong and Macau were in areas targeting tourists, the company said. However, a combination of negative factors including anti-mainland Chinese sentiment in Hong Kong and tightening visa restrictions for mainland Chinese visitors to the city have weighed down on the business.
The company’s same store sales growth for declined 24.1 percent year on year. Its mainland Chinese business dropped 16.1 percent but the fall in Hong Kong and Macau business was even more severe dropping 32.8 percent.
Chow Tai Fook said it would consolidate some of its 2,257 store network across greater China and negotiate with landlords to reduce the high rent pressures in Hong Kong.
The firm debuted its US acquisition Hearts on Fire in Mainland China, opening stores in Shanghai and Nanjing. The Hearts on Fire business posted a net loss of 32 million Hong Kong dollars, or $4.13 million, which the company attributed to weak consumer sentiment in the US in the second half of the fiscal year but Adrian Cheng said he hoped it would break even this year. It acquired the Boston jeweler a year ago for $150 million to appeal to a more premium customer.
The company denied it had discussed buying Japanese pearl necklace brand Tasaki & Co, contrary to a report last week.
“We did not consider or discuss acquiring any Japanese businesses or any retail or jewelry businesses overseas,” chairman Henry Cheng said.
Management highlighted its online business as a high growth area seeing 29.3 percent growth year on year in e-commerce sales and 202,0000 unique daily visitors to the company’s website, an increase of 65.5 percent over last year.