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Published on : Friday, November 27, 2015
Luk Fook Holdings International Limited reported revenue declined 7.7 percent to $898.6 million (HKD 5.4 billion) in the six months to September 30 as a result of the Chinese downturn and a weak Hong Kong tourism industry.
Slowing growth in mainland China, currency depreciation and the impact of relaxed visa requirements in other holiday destinations such as Europe, Japan and Korea all hit the Hong Kong retailer’s performance, according to a company statement November 26.
Overall revenue in Hong Kong – which makes up 60 percent of group-wide sales – fell 6.3 percent to $542.5 million. The devaluation of currencies against the U.S. dollar attracted tourists to shop in locations other than Hong Kong, especially when taking long vacations. This challenge was further intensified by poor macro-economic conditions in mainland China and Hong Kong which damaged the luxury industry, the statement said. Macau performed even worse than Hong Kong.
Profit for the first half slumped 43 percent to $59.8 million, in line with its profit warning earlier this month. Its loss on exchange-rate fluctuations was $2.4 million, compared with a gain during the same period last year.
The 16 percent drop in gem-set jewelry sales to $323.3 million was the main contributor to the overall revenue decrease. However, improved gold sales stemming from low prices of the precious metal in July and August stymied the decline.
The group’s profit margin narrowed by 1.2 percentage points to 23 percent due the sales mix of gold products, which was higher than expected. Rental costs increased, mainly at the loss-making new stores in certain prime Hong Kong locations, resulting in the ratio of operating expenses to revenue increasing 1.6 percentage points to 14.6 percent.
Retail sales in Hong Kong, Macau and other markets fell 7.3 percent to $645.1 million, while wholesale revenue in the region plummeted 50 percent to $154.8 million. In mainland China, retail sales slipped 5.1 percent to $73.3 million and wholesale revenue fell 8.5 percent to $133.6 million.
Inventories decreased 10 percent to $858.9 million. The group opened a net total of 29 Luk Fook stores and four 3D-GOLD self-operated shops through a new joint venture with a licensee in mainland China. The total number of stores globally stood at 1,412 at September 30.