Jewellery firms shrug off profit falls

Shares of jewellery retailers in Hong Kong leapt yesterday on a rebound in sales this month, despite net profit tumbling by as much as a third for the six months to September 30.

Luk Fook jumped 10.23 per cent to HK$23.15, while Chow Tai Fook Jewellery rose 5.4 per cent to HK$10.86, regardless of big drops in earnings and disappointing retail sales in the city last month.

Net profit at Chow Tai Fook, fell nearly one-third to HK$1.8 billion from the same period last year. Sales increased 6.5 per cent to HK$25.4 billion. The widening in the decline of same-store sales and more than HK$600 million in paper losses on gold hedging contributed to the earnings decline, its management said. The firm declared a dividend of six HK cents per share.

Net profit at Luk Fook, its smaller rival, slumped 22.4 per cent to HK$558.2 million in the six-month period owing to a substantial slowdown in the Hong Kong and Macau markets. Revenue from the two cities inched up 1.2 per cent to HK$4.6 billion from a year earlier, compared with 68.6 per cent year-on-year growth in the same period last year. Thanks to new shops opening on the mainland, sales there jumped 38.7 per cent to HK$1.27 billion. Total sales rose 7.4 per cent to HK$5.92 billion. An interim dividend of 38 HK cents per share will be distributed from earnings per share of 95 HK cents.

"We experienced a double-digit fall in same-store sales for the second quarter [to September] from a year earlier, and the drop worsened during Golden Week," said Kent Wong, managing director of Chow Tai Fook. "But we see an uptick in November as the change in same-store sales returns to positive this month."

Luk Fook chairman and chief executive Wong Wai-Sheung said big-ticket spenders have returned this month which helped to boost sales 20 per cent.