Hong Kong-based jeweler Tse Sui Luen (TSL) has expressed doubts about continuing business amid the long-term decline in demand for diamond jewelry and the rising price of gold.
The company reported a net loss of HKD 43.8 million ($5.6 million) for the first fiscal half that ended September 30, it said last week. Sales for the period dropped 36% to HKD 864.4 million ($111 million).
“The jewelry industry has continued to experience a downward trend mainly contributed by significant decline in consumer demand for natural-diamond jewelry, especially in the mainland China market,” TSL explained. “The directors of the company have given careful consideration to the future liquidity and performance of the group and its available financial resources to continue as a going concern.”
Continued increases in the price of gold have compounded the downturn in diamond jewelry, TSL noted.
“The group observed a significant deterioration of the overall retail market sentiment, which led to an extremely weak demand of luxury products in the greater China area, starting from the first quarter of the period,” it said. “Coupled with the record-breaking gold price, which caused consumers to delay their buying or buy less…the sales performance…was greatly affected during the period.”
The jeweler is taking some steps to help mitigate the market slowdown, including closing several loss-making stores, primarily in Hong Kong, and “substantially reducing staff head count,” it noted. The company is also minimizing its stock volumes.
Revenue in mainland China, TSL’s biggest market, decreased 37% to HKD 548.2 million ($70.4 million) as consumers shied away from luxury purchases.
“The depressed retail market in mainland China continued to be a key challenge during the period,” the company stated. “The continuing decline in the market demand for natural-diamond jewelry and the restrained consumer demand for 24-karat gold products as a result of the record-breaking gold price surge were the two major contributing factors.”
In Hong Kong and Macau, sales fell 42% to HKD 236.8 million ($30.4 million) as many visitors are no longer coming to purchase luxury goods in the municipality and local residents are spending money on the mainland or abroad, the company added.
Image: A TSL store in Hong Kong. (Shutterstock)
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