Luk Fook sales soar – but company warns of challenges ahead

Thanks to positive Hong Kong market sentiment and lower gold prices, Luk Fook Holdings has reported a 25.1 per cent boost in sales in the September half year.

The company says sales totalled HK$7.859 billion (US$1 billion) compared with $6.283 billion in the same period last year. Profit attributable to shareholders soared 27.9 per cent to $665.4 million.

Sales in the Hong Kong market, the company’s key source of revenue, rose 31.2 per cent as mainland Chinese visitor numbers continued to grow and retail sentiment improved.

Sales in Macau rose 19.9 per cent.

However the company has warned that the US-China trade war and the depreciation of the Renminbi are starting to impact on sales in the second half.

“Same-store sales growth in the Hong Kong and Macau markets … started to see a decline since the second half of October and recorded a single-digit drop for the period from October to [the] first three weeks of November,” the company said. “In Mainland China there was a double-digit drop.

“Therefore, the group remains prudent about its business development in the second half of the financial year. Nevertheless, with the anticipated considerable growth of the middle-class population in Mainland China, the group remains optimistic about the mid- to long-term business prospects.”

Luk Fook said that during the coming year, it will focus on enriching its product offer, expanding its footprint in Mainland China and adopting market-oriented strategies to penetrate into the mass market, covering the middle-class, wedding couples as well as kids.

“The group’s target for net shop addition in Mainland China for this financial year will maintain at not less than 120 shops. The group is also committed to further developing its e-commerce business and strengthening cooperation with e-commerce platforms in Mainland China.”

Targeting younger shoppers

In light of the enormous spending potential of young consumers on online sales platforms, the company plans to step up its efforts to promote the sales of affordable-luxury jewellery products to expand its footprint in the young consumer market.

“By understanding customers’ spending habits, the group will adopt holistic approach to penetrate into the markets for the middle-class, wedding couples and kids. It will also continue to attract customers and encourage local consumption by visual merchandising enhancement, cross-selling boosting and VIP promotional activities, so as to improve sales and profits. Given the importance of social media in product promotion, the group will continue to showcase and promote its products on mobile applications and social media platforms such as Facebook and WeChat.”

During the first half of the financial year, Luk Fook added a net 94 stores to its ever-growing network, including 90 in Mainland China, where is closed six self-operated stores and opened 96 licensed stores. Two company-owned stores opened in Hong Kong, one in Macau, and one in Malaysia, with a new licensed shop opening in the Philippines, However, one licensed store closed in South Korea.

The group now boasts a global network of 1725 Lukfook shops spanning Hong Kong, Macau, Mainland China, Singapore, Malaysia, Cambodia, the Philippines and the US.

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