Profit Warning: Chow Tai Fook'S Profit Is Expected To Fall By Half

Recently, Hong Kong jewelry retailers-- Chow Tai Fook Jewelry Group issued a profit warning that due to the further weakening of consumer demand, the profit of the whole year of 2015 may be only half of that of the same period last year.

The announcement pointed out that the sharp decrease in profits was mainly caused by the weak consumption desire in Greater China turnover And gross profit margin both fell. The decline in gross profit margin was mainly attributable to the unrealized hedging losses of gold lending recorded in the year ended March 31, 2016, compared with the unrealized hedging gains in the same period last year, and the increase in sales of gold products with low gross profit changed the sales portfolio.

The company said that if excluding the unrealized hedging gains or losses of gold lending and the impact of net foreign exchange losses due to RMB fluctuations, the profit in 2015/16 is expected to decrease by about 20-30% compared with last year.

This profit warning was lower than expected. According to Reuters, in January this year, CTF Group said that it would close some stores in Hong Kong. In the first half of fiscal year 2015, CTF's profit fell 42% compared with the same period last year. The depression of the overall economic environment has had a great impact on Chow Tai Fook Group.

Chow Tai Fook said that the increase in the proportion of sales of gold products with low profits led to a decrease in gross profit margin. In addition, unexpected losses occurred in hedging transactions. These factors will have an impact on the profits of the whole year.

In the 2014 fiscal year ended June 5, 2015, the net profit of CTF was HK $5.46 billion.

The weak performance of Chow Tai Fook is just a microcosm of the overall retail industry in Hong Kong. By the end of March, Hong Kong's retail sales had declined for the 13th consecutive month, while the sales of jewelry, watches and precious gifts had declined for 19 consecutive months.

The struggling Chow Tai Fook may continue to close its stores to reduce operational pressure. Zheng Jiachun, chairman of Chow Tai Fook, once told the media that in the first half of 2015, three stores in Hong Kong had been closed, and in the second half of 2015, the lease of seven to eight stores expired. He hoped to get more than 30% rent reduction, and some stores would directly consider closing their stores.

At present, Chow Tai Fook has three branches in the Xingang Center, of which the underground G12 shop lease will be held in the second half of the year. Based on the monthly rent of six branches of Chow Tai Fook (including Peak Plaza, Causeway Bay Lockhart Road, some Tsim Sha Tsui and Mong Kok branches, etc.) that have closed or will close in the past year, it is estimated that the monthly rent can reach 10 million yuan, or more than 100 million yuan annually.

It is worth mentioning that Chow Tai Fook is not the only listed gold and jewelry companies in Hong Kong stocks that have fallen into the morass of declining performance.

According to the Hong Kong Statistics Department, retail sales in Hong Kong fell 21% year-on-year to HK $37 billion in February, the largest drop since 1999, and also fell for 12 consecutive months. From January to February, retail sales fell by 14% year on year, including a sharp drop of 24% in sales of jewelry, clocks and watches.

Zhou Shengsheng, whose retail sales accounted for more than 80% of the total turnover Jewelry retail Net operating profit decreased by 20% over the previous year; The same store sales of Liufu Group fell by 27% in the first quarter of this year, compared with 20% in the same period last year.

Some insiders said, "It is expected that the scale of mainland tourists visiting Hong Kong will be difficult to recover in the short term; the stagnation of Hong Kong property market development and the relatively weak stock market will also make Hong Kong consumption decline. Looking forward to 2016, the negative factors of the whole year are expected to be difficult to eliminate in the short term, and Hong Kong retail industry will continue to decline."

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Hong Kong's latest unemployment rate remains at 3.4%

The latest statistics released by the Statistics Department of the Hong Kong Special Administrative Region Government on the 17th showed that the seasonally adjusted unemployment rate from February to April this year was 3.4%, the same as that from January to March, and the underemployment rate also remained unchanged at 1.4%.

By industry analysis, the increase in unemployment rate was mainly seen in the construction industry and professional and commercial services, while the decline was mainly seen in the arts, entertainment and recreational activities industry and information and communication industry.

Compared with the statistics from January to March this year, the total employment in Hong Kong from February to April decreased by about 5200 people to 3.8066 million people, the total working population decreased by about 1400 people to 3.9408 million people, and the number of unemployed people increased by about 3800 people to 134200 people.

Zhang Jianzong, Secretary for Labour and Welfare of the Hong Kong Special Administrative Region Government, said that according to industry analysis, the unemployment rate in the construction industry increased by 0.5 percentage points to 5.4% from February to April this year compared with the previous period. The recent decline in consolidation and construction activities in the property market may have an impact on this.

He also said that due to the decline of tourism industry in Hong Kong and the weakening of local consumption in Hong Kong, the unemployment rate of consumption and tourism related industries (retail, accommodation and catering services in total) further rose by 0.2 percentage points to 5.3%, and the number of employees has also declined year on year for the 12th consecutive period.

Zhang Jianzong said that the grim external environment and the slow growth of Hong Kong's local economy will continue to puzzle the short-term employment prospects. The weakening of labor demand in trade, tourism and construction related industries requires special attention.

Xian Riming, a professor of the Department of Marketing at the Chinese University of Hong Kong, said that the recent performance of Hong Kong's retail industry has declined sharply, and the industry may be closed or laid off in succession. At the same time, Hong Kong's exports continue to shrink, which will also affect the unemployment rate of logistics, insurance and other related industries. Retail and export are important economic pillars of Hong Kong. Their weak performance will affect other industries. It is expected that the overall unemployment rate will rise slightly in the next quarter.