Jeweler Chow Tai Fook records sharp fall in same-store sales in China

Chinese jewelry maker and retailer Chow Tai Fook saw a two-‎percent fall on the year in same-store sales in January-February for its group operations, which it attributed to ongoing weakness in the Chinese ‎retail sector.

Drops in sales at its Mainland China outlets were larger, with a 7-percent fall in same store sales during the period, while sales in ‎volume terms plunged 10 percent.

However, same store sales in Hong Kong and Macau rose 5 percent, while sales by volume soared 16 percent.

"The Group saw an overall Same Store Sales Growth (SSSG) of 2 percent during the Period, due to a high base of comparison from the same period last year and weak SSSG in the Mainland of China," the firm said in a statement.

However, the Hong Kong and Macau markets recorded a 5 percent rise in SSSG "boosted by a healthy Same Store Sales volume growth of 16 ‎percent, continuing the gradual pick-up trend since November and December 2012.

"Wholesale business in the Mainland of China continues to be weak during the period, as franchisees remained conservative in inventory replenishment, especially the high-end gem-set jewelry products. As a result of the current sluggish market sentiment in the Mainland of China, management expects that the ramp-up period of new points of sale (POS) may take longer [than forecast]. The Group opened a net 32 POS during the period bringing the total number of POS to 1,834 as of February 28," the firm adds.

In separate comments, the company's director of group branding, Alan Chan, said demand for its cheapest items is growing among young consumers, helping boost earnings as the global economy struggles.

Over the past six months, the firm's "average selling price is getting lower but we’re selling more pieces,” he told Reuters. Revenue is improving, he said, citing a pickup in demand for semi-precious stones. “This is better for margins.”

Young consumers are buying more jewelry, either as gifts for themselves or friends, attracted by Chow Tai Fook’s more colorful lower-value items, Chan says. “We are very excited because if we can sell more jewelry items, whether diamond, pearls or precious stones, it’s better for us."

Meanwhile, e-commerce sales grew three times as fast in the first six months of the fiscal year as they did in the same period a year earlier, Chan said.

Chan also said that fiscal fourth-quarter sales are in line with expectations.