China Rebound Boosts Chow Tai Fook Profit

RAPAPORT... Chow Tai Fook saw earnings grow in the first fiscal half amid surging gold prices and a recovery in the Chinese market.Profit jumped 45% year on year to HKD 2.29 billion ($296 million) for the six months ending September 30, even as sales fell, the Hong Kong-based jeweler said Tuesday. The retailer attributed the rise to the profitability of its mainland China operations, as well as the positive impact of higher international gold prices on its margins."Business in mainland China witnessed a steady recovery on the back of the easing Covid-19 situation in [the second fiscal quarter], whereas performance in Hong Kong, Macau and other markets remained lackluster," the company noted.Group revenue fell 16.5% to HKD 24.67 billion ($3.18 billion). Sales in Hong Kong, Macau and other markets dropped 63% to HKD 3.46 billion ($446 million) due to challenging market conditions and the closure of major border crossings, the company noted. However, revenue in mainland China grew 5% to HKD 21.22 billion ($2.74 billion), as coronavirus cases dropped and the company expanded its store network.Same-store sales - at branches open for at least year - were flat in China, as growth of 11% in the second fiscal quarter offset a decline of 11% in the previous three months. In Hong Kong, same-store sales plummeted 66%.Gold sales in mainland China dropped 7% on a same-store basis, and plummeted 75% in Hong Kong and Macau. Sales of gem-set jewelry dipped 2% on the mainland, and slid 54% in Hong Kong and Macau. Watch sales in China soared 47%, but slumped 42% in Hong Kong and Macau.During the period, Chow Tai Fook opened a net 286 locations in mainland China, and closed five in Hong Kong and Macau, primarily in tourist areas.Group retail sales rose 18% year on year between October 1 and November 18, with the figure rising 26% on the mainland and falling 11% in Hong Kong, Macau and other markets.Image: A Chow Tai Fook store in China. (Chow Tai Fook)