The decline in retail sales at Hong Kong-based jeweler Luk Fook narrowed in the third fiscal quarter as the company increased its gold offering and reduced the amount of diamond jewelry in its stores.
Sales slipped 6% year on year for the three months that ended December 31, the company said last week. The drop comes on the heels of socioeconomic challenges that have hit the luxury market in China and Hong Kong, as well as rising gold prices, which were up 34% year on year during the period, and dampened consumer sentiment compared to the same quarter a year ago. However, the figure is an improvement from the first half.
“The group’s third quarter, despite being the highest baseline quarter of the fiscal year, outperformed the previous two quarters in all aspects,” Luk Fook explained. “This demonstrates the group’s successful strategy of gradually replacing diamond products with other fixed-price products, especially fixed-price gold products.”
Same-store sales of fixed-price gold products advanced 58% during the October-to-December period, while fixed-price diamond jewelry slid 46%.
In China, retail sales declined 2% versus 13% in the second quarter. Same-store sales — those at branches open for at least a year — were down 11%. Meanwhile, in Hong Kong and Macau, overall sales decreased 20%, with same-store sales falling 24%.
Same-store sales of gold products dropped 12% on the mainland, an improvement from the 27% decline in the second quarter, as consumers became used to the rising price of the yellow metal, Luk Fook noted. Fixed-price jewelry slipped 1% overall, with plain-gold items in that category growing 47% and diamond-set jewelry plunging 46%. In Hong Kong and Macau, same-store sales of gold products were down 29%. Fixed-price jewelry fell 9%, as diamond-set goods plummeted 47% and gold jewelry soared 62%.
“Although the spike in gold prices may affect sales performance, an increase in profit margin will help mitigate the impact of the decline in sales,” the company noted. “Moreover, since the demand for diamond products remained subdued, the group will continue to actively promote non-diamond fixed-price jewelry products.”
Additionally, Luk Fook intends to expand “across the world,” it added. The company will open approximately 15 shops in overseas markets during the remainder of the fiscal year.
Image: A Luk Fook store in Hong Kong. (Shutterstock)
