The world’s largest listed jewelry chain by revenue doesn’t think the market meltdown in China will hurt demand for engagement or wedding rings: Some people might just buy smaller diamonds.
“The stock market has been volatile lately and that will of course impact consumption,” Kent Wong, managing director of Chow Tai Fook Jewellery Group Ltd., said Thursday. “But there are some products that still need to be bought, like wedding jewelry and engagement rings.”
The Hong Kong-based jeweler said its retail sales fell 6 percent by value in the April-to-June quarter on weak buying in Hong Kong and Macau. The company has been hurt by China’s slowing economic growth and a government-led austerity campaign, which has prompted shoppers to cut back on luxury purchases.
Chow Tai Fook may see “a bit of impact” due to the recent stock market rout, Wong said. The slump in the benchmark Shanghai Composite Index has helped wipe out more than $3 trillion of market value since June 12, causing panic among investors and prompting regulators to introduce support measures.
Shares of Chow Tai Fook closed down 0.6 percent at HK$7.85 Thursday in Hong Kong, compared with a 3.7 percent gain in the Hang Seng Index. The company’s shares have fallen 25 percent this year, against the benchmark index’s 3.3 percent gain.
Same-store sales at Chow Tai Fook outlets open a year or more fell 7 percent in mainland China during the quarter ended in June, and were down 24 percent in Hong Kong and Macau, the jeweler said in a statement Thursday. The slowdown in those two cities is likely to get worse as Chinese tourists explore new destinations, Wong said.
Still, the company remains confident about China’s long-term economic growth and in Chinese shoppers’ spending power, which Wong said should revive by the year’s end.
“People will still need to buy Christmas presents,” he said. “If they’ve earned more happy money that year they might spend more, but if they haven’t then they might be more sparing.”
The value of general retail sales in Hong Kong fell 0.1 percent in May, easing from April’s revised 2.1 percent slump, the government said last month. Sales volume rose 4.6 percent in May amid a series of discounts and promotional campaigns by the city’s tourism department and businesses.
Chow Tai Fook cut prices for some of its diamond-set products by as much as 30 percent in June, seeking to reduce bloated inventories, Bloomberg Intelligence retail analyst Catherine Lim said.