China slowdown hits HK jewellery retailers
Hong Kong retailers Luk Fook Holdings (international) Ltd and Tse Sui Luen Jewellery (International) Ltd or TSL reported lacklustre profits in fiscal year 2023 largely due to slow market recovery in China.
TSL recorded a loss of HK$71.5 million (around US$9.12 million) for the year ending March 31, 2023 from a profit of HK$15.5 million (about US$2 million) in the previous year. Meanwhile, Lukfook’s net profit fell 7.7 per cent year on year to HK$1.28 billion (roughly US$163.4 million).
Annie Tse, chairman and CEO of TSL, explained that retail in China suffered from residual effects of the pandemic.
“As the group’s businesses in China are significant contributors to its profitability, sales performance during the year was inevitably affected, especially by the plummet in retail sales in China due to declining consumer confidence,” Tse continued.
TSL also noted a year-on-year decrease of 18 per cent in turnover from China during FY2023. The total number of TSL stores in China reached 471 as of the end of its fiscal year.
China business was also down for Lukfook, with total revenues and retailing revenues falling 19.6 per cent and 8.7 per cent, respectively.
Although retailing revenue from all key markets grew by 18.4 per cent to HK$8.77 billion (around US$1.12 billion), the retailer explained that growth was countered by weak wholesaling revenue due to sluggish demand for diamond products in China.
Meanwhile, both companies saw a surge in retail sales in Hong Kong due to vast improvements in tourist arrivals and spending after borders were reopened.
According to Lukfook, recovery in Hong Kong and Macau continued in the first quarter of FY2024, with sales rising approximately by 70 per cent from April to June 21, 2023. By comparison, sales in China remained “relatively flat.”
China however remains a significant aspect of the jewellers’ overall portfolio. Lukfook said its new three-year corporate strategy focuses on China’s market expansion, branding and operational efficiency to foster growth.
As of March 31, 2023, Lukfook has a global network of 3,105 shops, majority of which is in China.
“Under the ‘dual circulation’ policy and prioritising the expansion of domestic demand by the mainland government, the group remains optimistic about the mid- to long-term business prospects in China,” said Wong Wai Sheung, chairman and CEO of Lukfook.
TSL said it will focus on reinforcing its online and offline retail network as it strengthens its e-business model through improved e-shop operations and cooperation with e-commerce platforms.