Earnings
Chow Tai Fook flags 90% to 100% jump in first-half profit on gold-loan gains as quarterly retail value slips 0.5%
The Hong Kong jeweller's profit surge rests largely on a fair value gain on its gold loans, while mainland sales fell and it closed 263 mainland outlets in the quarter.
HedgeWeekly News Desk ·
Chow Tai Fook Jewellery said it expects net profit for the six months to September 30 to rise between 90% and 100% from a year earlier, according to The Standard and a Newsquawk pre-market note. The company attributed the increase mainly to a fair value gain on its gold loan contracts, against a loss on the same contracts a year ago, and to better sales in key markets. Measured against the HK$2.53 billion it earned attributable to shareholders in the same half last year, the guidance implies roughly HK$4.8 billion to HK$5.1 billion.
Trading in the July-to-September quarter was weaker than the headline suggests. Total retail value fell 0.5% year on year as a 5.3% decline on the Chinese mainland, which makes up 83% of the total, outweighed a 33.2% rise in Hong Kong, Macau and other markets. The company put the mainland decline mainly down to network optimisation: it opened 23 mainland jewellery points of sale in the quarter and closed 263.
Hong Kong and Macau were the bright spot, with same-store sales up 29.6%, while group same-store sales rose 2.2% at self-operated stores and fell 2.9% at franchised ones. Average selling prices for weight-based gold jewellery moved in opposite directions: HK$10,200 on the mainland, up from HK$9,500, and HK$15,400 in Hong Kong and Macau, down from HK$16,800. Rival Luk Fook reported a 12% rise in second-quarter same-store retail sales on the same day.
Why it matters: the profit alert is mostly a mark-to-market story. Gold loans are revalued as the metal moves, and the year-earlier loss on the same contracts shows the effect can run the other way; gold was trading near $4,022 an ounce on Friday after falling almost 3% on Thursday. For investors in Hong Kong-listed consumer names, the cleaner signal is the operating split: a mainland network still shrinking while Hong Kong and Macau demand recovers. Full interim results will show how much of the gain is underlying.