RAPAPORT... Chow Tai Fook reported that its profit slumped 33 percent year on year to $244.2 million (HKD 1.89 billion) during the first fiscal half, which ended on September 30. Sales grew 7 percent to $3.28 billion (HKD 25.44 billion), while same store sales fell 1.7 percent. The Hong Kong-based jeweler stated that cost of sales rose 12 percent to $2.42 billion (HKD 18.73 billion) as the higher prices for gold diminished the company’s gold hedging activities.
![](FilesRep/Gallery/Chow Tai Fook Store2.jpg) Chow Tai Fook outlined significant challenges for the jewelry industry during the period as the weak global economy affected China’s trade, which subsequently lowered consumption and investment confidence. All these factors affected the purchase sentiment of luxury goods, especially from the high-end and gem-set jewelry category, according to company spokespersons. Consumers either restrained from purchasing or lowered their budget for jewelry, the company observed.
Revenue in China, including wholesale and retail sales, rose 7 percent to $1.85 billion (HKD 14.32 billion) as the company continues to expand to tier-2 to tier-4 inland cities. Chow Tai Fook added 101 points of sale in China during the period to bring its total to 1,633. Revenue in Hong Kong, Macau and Taiwan, including its wholesale business and 99 points of sale, grew 3 percent to $1.62 billion (HKD 12.55 billion), with tourists from Mainland China constituting the company’s largest customer group.
The jeweler noted that wedding and bridal jewelry and diamond products contributed a significant share of the group’s sales during the period. In addition, mass luxury gem-set jewelry maintained substantial growth spurred by rising self-purchases to supplement the core wedding and gifting purchases. The company reported that the contribution of gem-set jewelry priced below $12,900 (HKD 100,000) increased during the period.
Chow Tai Fook recently signed an agreement to procure rough diamonds from Russia-based mining company ALROSA, supplementing its supply from De Beers and Rio Tinto. The company’s inventory of raw materials for gem-set jewelry fell 24 percent from March to $728.6 million (HKD 5.65 billion) as of September 30. Total inventory grew 7 percent to $4.09 billion (HKD 31.71 billion), while its cash on hand fell 46 percent to $693.1 million (HKD 5.37 billion).
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