Jeweller Chow Tai Fook set to see mild but bumpy recovery in 2017, say analysts
Earlier Lunar New Year boosted same-store quarterly sales in mainland 4pc while in Hong Kong and Macau they slipped 2pc
Chow Tai Fook Jewellery, China’s largest jeweller by market value, is expecting a mild but bumpy recovery this year, despite a strong sequential uptick in same-store sales in mainland China, Hong Kong and Macau during the October to December period last year.
Hong Kong-listed Chow Tai Fook said its same-store sales compared with the same period last year in mainland China during the period rose four per cent while in Hong Kong and Macau they slipped two per cent, showing a strong improvement from the first half of the financial year 2017, according to the company’s latest quarterly figures.
Morgan Stanley said in a research report that although the increase seemed decent in the short term, they viewed it as “lower-quality” recovery as it was mainly driven by the sale of more gold items, an earlier Lunar New Year , as well as a lower gross profit margins, all of which are unsustainable, according to two of its analysts, Edward Lui and Lillian Lou.
“The improvement is encouraging, but it was helped by declining gold prices during the quarter. That’s lower quality in our view”, their report said.
As gold prices dipped 9 per cent during the quarter, gold jewellery buyers gave a 7 per cent boost to Chow Tai Fook’s mainland sales. This compared with a 27 per cent decline in the previous quarter, according to separate reports by Morgan Stanley and the Bank of America Merrill Lynch.
Similarly, in its shops in Hong Kong and Macau, there was an eight per cent increase in gold product sales year on year from October to December.
