HONG KONG (BLOOMBERG) - Chow Tai Fook Jewellery Group's profit increased for a second consecutive six-month period as demand for gold products lifted sales at the world's leading jewellery retailer.
Shares jumped after the company reported net income rose 46 per cent to HK$1.78 billion (S$308 million) in the six months through September. The stock rose 4.4 per cent to HK$9.19 as of 11.03am in Hong Kong on Wednesday (Nov 22), heading for its biggest two-day gain in a year.
The results mirror the continued recovery in demand for luxury goods in China after a two-year slump amid a corruption crackdown in the country.
Sales at the company's stores are picking up and more customers are also purchasing its products online as the world's second-largest economy is on track for its first full-year acceleration in seven years.
Revenue climbed 15 per cent to HK$24.8 billion, the Hong Kong-based company said on Tuesday. Retail sales of Chow Tai Fook in mainland China increased 16 per cent, and 13 per cent in Hong Kong and Macau. Growth momentum was fuelled by gold products, the company said.
The current financial year "will be a turning point for our business given the nascent jewellery market recovery", the company said. "Although the recovery is gradual and mild, the industry is expected to return to a stable yet sustainable growth."
The retailer expanded the number of outlets in mainland China to 2,358 at the end of September. It will continue the expansion "in view of the improving general consumer sentiment, coupled with the rising opportunities from the development of shopping malls in the region", Chow Tai Fook said.
In Hong Kong and Macau, the company will optimise outlets in tourist centres and selectively open stores in residential neighbourhoods.
The company expects its total rent cost declining 15 per cent in the current financial year, finance director Hamilton Cheng said at a press briefing in Hong Kong on Tuesday after the results.
Demand for jewellery, watches and clocks, and valuable gifts has been picking up. Sales of these products in Hong Kong rose 4.3 per cent this year through September, compared with a 17 per cent plunge in all of 2016.
Luxury-watch retailer Hengdeli Holdings said this month that it is boosting orders for the upcoming Chinese New Year, expecting stronger demand from shoppers in Hong Kong.
Tourists from mainland China, who account for more than three quarters of arrivals to Hong Kong, grew in the nine months through September.
With more Chinese tourists likely to travel to Hong Kong next year as the yuan strengthens against the Hong Kong dollar, retailers are poised to benefit from the rise in store sales and falling rents, according to Ms Catherine Lim, an analyst at Bloomberg Intelligence.