Chow Tai Fook stocks plunge as luxury crisis deepens in HK

Chow Tai Fook Jewellery Group Ltd. dropped the most in eight weeks after the world’s largest listed jewellery chain reported earnings that missed analyst estimates. The stock fell as much as 5.2 per cent in Hong Kong trading yesterday, the biggest intraday decline since April 13. The benchmark Hang Seng Index was little changed.
Net income at the Hong Kong-based jeweller fell 25 per cent for the year ended March, as sales weakened in China and major markets such as Hong Kong and Macau, it said Friday. That missed the HK$5.9 billion average of 23 analyst estimates compiled by Bloomberg.
‘We are becoming more concerned about the company’s outlook,’ UBS AG analysts led by Spencer Leung wrote in a note on Friday. Hong Kong, which contributed 45 per cent of the company’s total, ‘might have entered a new era as tourism peaked out,’ they wrote.
Chow Tai Fook’s jewellery sales fell 16 per cent in China and 33 per cent in Hong Kong and Macau, as Chinese shoppers cut back on luxury spending amid a slowing economy and the government’s austerity campaign.
The jeweller plans to focus its expansion on the Mainland by adding as many as 160 points of sale, slowing from 180 net additions in the 2015 fiscal year, UBS said. The company also plans to consolidate its retail network in the two cities.
China International Capital Corp. predicts that Hong Kong and Macau sales may continue to drag the overall performance in the 2016 fiscal year. Still, it’s positive about the stable growth in Mainland China, expecting it to perform better in the second half than the first, analysts led by Rui Guo said in a report on Monday.