For the world’s largest listed jewelry retail chain – 85-year old Chow Tai Fook that operates 2,243 Point-of-Sales (POS), there has been a major setback in its 3rd Quarter performance. Overall, same-store sales for the company have fallen 18% in the Year-on-Year (YoY) October-December Quarter period. While the figure for mainland China is 15%, the same is 21% for Hong Kong, Macau and other markets.
In terms of same-store sales volume there was an overall 15% drop, with 16% decline in mainland China and 13% in Hong, Macau. Retail sales took a beating with 10% overall decline – 6% and 16% for mainland China and Hong Kong, Macau respectively for the quarter period.
A primary reason slated for this poor performance is ‘Occupy Central’ movement that began in Hong Kong on 26th September, lasted for 79 days till 15th December and saw around 100,000 people protesting on streets. The protests that were ended by local police using tear gas to disperse mob had afflicted the local traffic and business.
Chow Tai Fook referred the ‘weak consumer sentiments for high-end jewelry in Hong Kong and Macau’ and ‘weaker demand in the luxury market’ as reasons for its failing results. Occupy protests not just affected the business in Hong Kong but also hurt the Chinese consumers’ feelings, who may no longer be interested in Hong Kong, according to an analyst. If this hypothesis is even roughly correct, then all businesses based out of Hong Kong will be affected in terms of their mainland China market. Chow Tai Fook’s competitors – Luk Fook and Chow Sang Sang among others may also witness declining performance.
The bad news, however, does not stop at the sales drop. 6-months profits of Chow Tai Fook, for April to September period, plummeted by 23%. Besides, the company has also cut its 2015 sales guidance, with forecast of sales decline increased to double-digit figure and expected to ‘remain at the negative zone’.
While the Hong Kong Jewelry Manufacturers Association (HKJMA) is seeking growth of its members in China, the current trends and sentiments may act as a big hindrance. Many industry reports including De Beers Diamond Insight report had put an emphasis on China as a driver of the diamond industry. But recent performances of Chinese jewelry companies may challenge such forecasts.
What needs to be seen is whether the dismal performance is a result of just one public protest or there is a bigger shift in luxury market trend forming in China.