Luk Fook latest to warn of falling profit
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Luk Fook has become the second major jewellery retailer this week to warn shareholders of a severe impact on its bottom line.
In a filing with the stock exchange yesterday, Luk Fook said it anticipated a decline of about 40 per cent compared to the corresponding period last year.
The company said the drop was primarily due to declining gem-set jewellery product revenue, a fall in the overall gross margin as a result of increased sales mix of gold products driven by the small-scale “gold rushes” and a higher rent to revenue ratio.
Expanded losses in investments in relation to Hong Kong Resources Holdings and its subsidiary also contributed.
Earlier this week rival jeweller Chow Tai Fook warned of a profit plunge as high as 50 per cent citing similar reasons.
Questions & Answers
Q.What is the anticipated percentage decline in profit for Luk Fook?
What is the anticipated percentage decline in profit for Luk Fook?
Luk Fook anticipates a profit decline of about 40 per cent compared to the same period last year. This information was shared in a filing with the stock exchange yesterday.
Q.What are the main reasons given for the expected fall in profit?
What are the main reasons given for the expected fall in profit?
The primary causes include falling revenue from gem-set jewellery and a lower overall gross margin. This latter point is due to more gold product sales and a higher rent to revenue ratio, alongside investment losses.
Q.Are other jewellery retailers experiencing similar issues?
Are other jewellery retailers experiencing similar issues?
Yes, rival jeweller Chow Tai Fook warned earlier this week of a profit plunge of up to 50 per cent. They cited similar reasons for their anticipated decline.
Q.What is meant by the 'increased sales mix of gold products'?
What is meant by the 'increased sales mix of gold products'?
The company attributes this to small-scale “gold rushes” which have driven sales of gold products. This shift in sales mix has contributed to a fall in the overall gross margin.
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