China’s Slowdown Is Killing Its Luxury Market

The company reported its first half profit for 2015 plunged 42 percent due to weak demand in Hong Kong and Macau and an economic slowdown, Macau Daily Times noted.

Chow Tai Fook’s net income fell to HK$1.56 billion ($201 million) for the six-month period ending in September. In the same period a year ago, the company’s net income was HK$2.69 billion. Sales for the six-month period fell 4.1 percent from a year ago to HK$28.1 billion, while same-store sales fell 18 percent in Hong Kong and Macau, but rose 0.1 percent in mainland China.

The company warned investors back in early November that its profits are expected to decline due to the weakness in Hong Kong and Macau, along with an unfavorable sales mix of lower-margin gold products and unrealized hedging losses.

Is Tiffany Winning Where Chow Tai Fook Is Failing?

Tiffany & Co. reported its third quarter results on Tuesday. Commenting on the Asia-Pacific region, the company said that total sales rose 6 percent in the third quarter and comparable store sales rose 2 percent. Total sales and comparable store sales in the year-to-date period rose 6 percent and 4 percent, respectively.

On a constant-exchange-rate basis, Tiffany said that it saw “healthy sales growth” in China, but sales declined again in Hong Kong and Macau.

Tiffany also announced a total sales and comparable store sales growth in Japan of (FX-neutral) of 34 percent and 24 percent, respectively. According to a report by Bloomberg, Tiffany is “eating Chow Tai Fook’s breakfast” as Chinese tourists accounted for a “significant” portion of the growth Tiffany experienced in Japan.

Bloomberg also noted that Chinese goods don’t have a “particularly good” reputation among Chinese shoppers, which might also explain why Tiffany is seeing success in a region where Chow Tai Fook “should be cleaning up.”