Nov. 27 (Bloomberg) -- Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewelry chain, forecast “steady” growth for the rest of the fiscal year after first-half profit almost doubled on a surge in Chinese demand for gold.
Net income rose to HK$3.5 billion ($451.5 million) from HK$1.82 billion a year earlier for the six months ended Sept. 30, the company said in a stock-exchange statement yesterday. That was above the average estimate of HK$2.98 billion from five analysts compiled by Bloomberg.
Retail sales of gold in China jumped between April and June as global bullion prices plunged, aiding Chow Tai Fook and smaller competitors such as Luk Fook Holdings International Ltd. The Chinese economy is showing signs of resilience and demand for jewelry continues to be strong, the company said in its statement, citing government data.
“We are still holding an optimistic attitude towards the market,” said Hamilton Cheng, finance director of Chow Tai Fook, adding that it is too early to give a precise forecast for the rest of the year.
The stock climbed 4.1 percent to HK$12.80 as of 9:36 a.m. local time. The benchmark Hang Seng Index lost 0.07 percent.
Sales jumped 49 percent during the six-month period to HK$38 billion and rose 33 percent at stores open for at least a year. The company said it opened 118 new points of sale, which includes standalone stores and concessionaire counters, taking the total to 1,954 as of the end of September. Bullion for immediate delivery has dropped about 25 percent in Singapore this year.
China’s gross domestic product growth rebounded to 7.8 percent in the third quarter from a year earlier after a pace of 7.5 percent in the previous three months.
Luk Fook earlier this month also said it expects first-half net income to increase “significantly” on higher sales of gold products and gem-set jewelry.
Chow Tai Fook’s second-half sales growth may be “softer” and same-store sales growth could slow to mid-to-low single digits, Catherine Lim, an analyst at Citigroup Global Markets Inc., wrote in a report last month. Gold price movements could also swing the company’s margin outlook, she wrote.
“The gold rush now is not comparable with that in April, May and June,” Kent Wong, managing director of Chow Tai Fook, told reporters in Hong Kong. “It’s reasonable to see sales slowed but this is within our expectation. Gem sales have improved as customer confidence recovered.”
Chow Tai Fook forecasts capital expenditure of HK$1.5 billion for the rest of the year, Cheng said.
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.
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