Chow Tai Fook's 1Q Revenue +63%

Gold Price Plunge Spurs Chinese Consumer Demand

Jul 10, 2013 2:37 AM By Avi Krawitz

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RAPAPORT... Chow Tai Fook reported that group revenue surged 63 percent year on year in its first fiscal quarter that ended on June 30, as consumers rushed to buy gold products when gold prices plunged in April. Revenue in Mainland China grew 45 percent and by 85 percent in Hong Kong and Macau during the quarter. The company did not provide sales figures.

Shares in Chow Tai Fook rose 10 percent to trade at HKD 8.89 on Wednesday afternoon in Hong Kong. The share price is down 32 percent since the beginning of the year. Hong Kong’s Hang Seng index was slightly lower in the day’s trading after the Chinese government reported weaker than expected June trade data. The country’s exports dropped 3.1 percent from a year earlier, registering its first decline since January 2012, while imports edged down 0.7 percent.

However, Chow Tai Fook remains focused on expanding within China and opened 17 new points-of-sale in Mainland China and three in Hong Kong during the June quarter. The company had 1,856 points-of-sale as of June 30.

Group same-store sales during the quarter increased 48 percent with China up 32 percent and Hong Kong and Macau, rising 68 percent. Same-store sales of gold products grew 78 percent, while gem set jewelry increased 8 percent.

Chow Tai Fook improved its inventory turnover of finished goods to 120 days from 170 days in the previous quarter and its inventory level decreased by about 1 percent during the period. The company explained that it maintains a prudent procurement strategy to focus on fast moving products with gold accounting for 69 percent of its revenue, compared with 57 percent in the previous fiscal year. The company added that its wholesale business in China improved as franchisees increased their replenishment of inventory.

Gold prices fell sharply in mid-April and have continued to decline spurring strong consumer demand for the metal. Gold prices have declined by 25 percent since the beginning of the year.

Tags: Avi Krawitz, Chow Tai Fook, diamonds, jewellery, Jewelry, Rapaport