Hong Kong-based jewellery retailers are setting their sights on the Chinese market to boost growth as the world gradually recovers from pandemic-related business challenges.

Luk Fook Holdings (International) Ltd and Tse Sui Luen Jewellery Ltd (TSL) said prospects are brightened by visible gains in China due to strong domestic consumption arising from a more stable Covid-19 situation as well as continued overseas travel restrictions. 

Lukfook’s annual results ending March 31, 2021 showed a decline of 21.1 per cent in revenues, with the coronavirus crisis heavily impacting retail sales in the key markets of Hong Kong and Macau. Profit attributable to equity holders meanwhile increased by 17.4 per cent.

Hong Kong in particular suffered from a dwindling number of tourists who usually purchase luxury items in the city. Tourist arrivals from China were down 99.6 per cent year on year from January to March 2021, data from the Hong Kong government showed. 

The domestic market in China however continued to recover, fuelling growth in major business segments. By comparison, Lukfook's same-store sales in China were down 4.7 per cent as opposed to 47.1 per cent in Hong Kong and Macau.

“In view of the anticipated considerable growth of the middle-class population in the mainland, Lukfook remains optimistic about mid- to long-term business prospects,” the retailer said. “The group will focus its expansion on the mainland market, and expect to add 350 shops, mainly licensed shops, in fourth- and fifth-tier cities in the new financial year.”

According to TSL, China was one of the first to recover from the pandemic, having been able to reopen businesses, the jewellery sector included, by mid-2020. 

The company said sales in China had returned to near pre-pandemic levels and have gradually been regaining growth momentum since. Turnover of TSL’s self-operated stores in China during the fiscal year rose 3.9 per cent year on year while same-store sales grew 13.3 per cent. Hong Kong and Macau saw a decline of 50.2 per cent with same-store sales receding by 39 per cent.

“Such encouraging sales rebound partly offset the group’s loss during the year. The group will grasp this opportunity arising from the increasing spending power of the younger generation to rejuvenate our business presence among first- and second-tier cities in China,” revealed TSL.