June 27 (Bloomberg) -- Chow Tai Fook Jewellery Group Ltd., a Hong Kong-based chain with more revenue than Tiffany & Co., said profit jumped 79 percent last fiscal year as it expanded and benefited from higher luxury spending in China.
Net income rose to HK$6.34 billion ($817 million) for the 12 months ended March 31, according to a Hong Kong stock exchange filing yesterday, matching the average of 12 analysts’ estimates compiled by Bloomberg. Revenue jumped 61 percent to HK$56.6 billion.
The world’s biggest listed jewelry retailer raised about HK$15.8 billion in a public offering last December and joins companies including Burberry Group Plc and Prada SpA in betting on China’s demand for luxury goods. Chow Tai Fook plans to double sales in three years by opening new outlets, Chairman Henry Cheng said at a press conference in Hong Kong yesterday.
China’s growing middle class is helping to bolster revenue despite weaker economic expansion in the world’s second biggest economy, Cheng said. Same-store sales at outlets open more than a year grew 40 percent.
“Retail sentiment has weakened in recent months as consumers became more prudent because of economic uncertainty,” Cheng said. “That’s reflected in lower spending per customer per transaction, but as the size of China’s middle class is growing, this helps to boost total sales.”
Chow Tai Fook shares rose as much 3.4 percent to HK$9.53 as of 9:33 a.m. in Hong Kong trading today. The city’s benchmark Hang Seng Index fell 0.04 percent. The stock has dropped 36 percent from its HK$15 initial public offering price.
The world’s second-largest economy expanded 8.1 percent in the first three months of this year, the fifth quarterly deceleration. Average annual urban disposable income rose 14 percent in China to about 21,810 yuan ($3,427) last year.
Adding New Stores
Sales of discretionary goods in China will grow by a compounded annual rate of 13.4 percent between 2010 and 2020, as shoppers in the world’s largest economy after the U.S. become richer, McKinsey & Co. said in a report in March.
Chow Tai Fook had 1,627 outlets as of the end of March, it said yesterday, compared with 1,358 a year earlier. The company expects to have 2,000 stores by 2014, Managing Director Kent Wong said.
The company expects capital expenditure of HK$800 million to HK$1 billion in the fiscal year ending March 2013, with as much as HK$400 million to be spent on adding at least 200 new stores in the period.
Founded in 1929 in the southern Chinese city of Guangzhou, the jeweler was named after founder Chow Chi Yuen. “Tai Fook” means “big blessing” in Chinese. Before the public offering, the company had predicted earnings of “not less than” HK$6.3 billion for the fiscal year ended March 2012.
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