Luk Fook sales down as Covid-19 throttles tourism

Hong Kong-listed jeweler Luk Fook says its March-quarter same-store sales plunged 57 percent as the Covid-19 outbreak saw the mainland border closed and tourist numbers fall to almost zero.

Sales of gem-set jewelry were down by 64 percent year on year, and of gold (by weight) by 58 percent.

The sales decline was worst in Hong Kong and Macau, falling by 60 percent overall due to Macau stores being closed for most of February and March, and low footfall in Hong Kong. The only positive note was that the gold price rose by about 20 percent during the quarter which boosted the average selling price of gem-set jewelry by a similar amount.

Sales at self-operated stores on the mainland were down by 41 percent and of licensed stores by 32 percent. Most of Luk Fook’s stores on the mainland were closed for the entire month of February and while most reopened in March, the company said foot traffic “largely declined”.

During the March quarter, Luk Fook permanently closed two stores in Hong Kong and one in Macau. On the mainland it opened a net 26 new stores taking its network to 2046.

“Given most of the new shops were opened before the outbreak, the expansion plan for FY2020 therefore has not been seriously affected,” the company said in a stock-exchange filing.

“The net shop addition for the full year was 287 shops, slightly below the target of 300 shops. With the gradual recovery of industrial, consumption and investment activities in Mainland China, the group’s business [on the mainland] improved progressively in the first two weeks of April, while the business in Hong Kong and Macau has not shown obvious signs of recovery due to substantial decline in the number of visitors as compared with the same period last year.”

To reduce costs during the ongoing pandemic, Luk Fook has adopted a policy of natural turnover and unpaid leave measures for staff to cut labor costs, and negotiated rent relief with landlords. A reduced inventory has left the company in a strong cash position.