Chow Tai Fook revenue soars 34% in annual report

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Strong gold sales and improved wholesale business drives growth.

Jewellery group Chow Tai Fook experienced significant growth in the 2013/2014 fiscal year with revenue rising 34.8% to HK$77,407million (£5,896m) compared to HK$57,433m (£4,374m) in 2013, according to its annual financial report.

Gross profit rose 29.9% to HK$21,152m (£1,611m) compared to HK$16,283 (£1,240m) in 2013, while net profit also increased by 31.2% to HK$7,449 (£567m) from HK$5,678m (£432m) in 2013.

The revenue surge is thought to be caused by strong retail sales, especially of gold products and an improvement in wholesale business in mainland China.

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However, gross profit margin fell 1.1% points to 27.3% and net profit margins also fell 0.3% points to 9.6%. This decline is deemed to have been caused by the shift towards gold products in the first half of FY2014 as a result of the gold rush.

It was good news for shareholders with profits soaring 32.1% to HK$7,272m (£553m), with basic earnings per share also up 32.1%.

In addition, the Group’s same store sales growth rebounded to 18.6% in fiscal year 2014, from a decline of 3.3% in FY2013. This is attributable mainly to a significant increase in same-store volume growth and the success of gem-set and gold product ranges.

Speaking of Chow Tai Fook’s full year results, chairman Dr. Henry Cheng said: “FY2014 was an eventful year with remarkable results and exciting opportunities. As a leading jeweller with strong fundamentals, visionary business strategy and market-driven approach, the Group was capable of capturing opportunities and optimising returns as markets rebounded.”

Mainland China continued to be the Group’s biggest market segment with revenue of HK$42,148.2m (£3,210m), contributing 54.5% to the company’s total revenue.

Points of Sale

During the 2014 financial year, the Group opened 188 jewellery points-of-sale and 46 watch POS in Mainland China. Among the new jewellery POS, 63.8% are located in Tier III and lower tier cities such as Yanling in Henan Province and Baiyin in Gansu Province.

As of March 31 2014, the total number of jewellery and watch POS in mainland China increased to 1,965 compared to 1,731 in March 2013.

The remaining 45.5% of the Group’s total revenue came from Hong Kong, Macau and other Asian markets.

In terms of e-sales, the Group’s e-commerce revenue grew 90.7% year-on-year.

Long-term Outlook

In the long term, Chow Tai Fook expects “signs of uncertainly in the retail markets” to have limited impact and expects the demand for mass luxury jewellery and wedding-related jewellery in mainland China, Hong Kong and Macau to increase. Youth-line products and fashion jewellery are also being deemed as increasingly important, and these customers represent the largest and continuously growing segment for the Group.

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