Luk Fook sales plummet by half in first two months of 2020

Hong Kong jeweler Luk Fook says its sales halved during the first two months of this year as the coronavirus outbreak caused an extensive lockdown of mainland Chinese cities and visitors to Hong Kong and Macau fell sharply.

While most mainland stores have reopened this month, customer footfall of the shops operating in Mainland China, Hong Kong and Macau was “still sparse” said chairman and CEO Wai Sheung Wong in a profit warning. “It is expected to take some time for the business to resume normal.

“Therefore … there will be an acute drop in revenue for the period from January to March. It is therefore highly likely that certain losses will be incurred in the fourth quarter. It may lead to a substantial decline in the group’s revenue and profit for the financial year ending March 31.”

With Macau stores closed for most of February, sales in the combined Hong Kong and Macau market decreased by more than 50 percent.

“Economic activities in Mainland China were almost halted due to the outbreak,” said Wong. “In the first two months of this year, industry, consumption and investment all hit record low with the double-digit decline, crashing the macro-economy severely.”

Group-wide, same-store sales of gold products and gem-set jewelry products in Luk Fook’s own stores were down by 45 percent and 54.9 percent, respectively. In Hong Kong and Macau overall sales were down by 52.8 percent, with gold products down by 47.3 percent and gem-set jewelry products by 58 percent.

On the mainland, where shops were closed in February, same-store sales fell by 37.1 percent. Gold sales were down by 38.6 percent and gem-set jewelry sales by 31.8 percent.

Retail sales through licensed shops and self-operated shops of the group in Mainland China fell by half.

During the pandemic, the company has not replaced staff leaving of their own accord and introduced leave without pay to reduce staffing costs. It has also negotiated rent reductions with landlords.

Expansion plan on track

Despite the huge impact of the coronavirus on sales, Luk Fook remains committed to its expansion plan which Wong said “has not been seriously affected”.

“It is estimated that the net shop additions for the current financial year would only be a bit less than the target of 300 shops. In addition, the group’s unaudited revenue and profit for the period for the nine months ended December 31 were about 60 percent and 55 percent respectively ahead of those for the year ended March 31, last year.”

He said fourth-quarter operational data will be released in mid April.