Chow Tai Fook Falls Most in 5 Months as Net Misses Estimates

Chow Tai Fook Jewellery Group Ltd. dropped the most in five months after the world’s largest listed jewelry chain reported earnings that missed analyst estimates.

The stock fell 6.5 percent to HK$8.58 at the close of trading in Hong Kong, the biggest decline since Jan. 9. The benchmark Hang Seng Index rose 0.2 percent.

Net income at the Hong Kong-based jeweler fell 25 percent to HK$5.46 billion ($704 million) 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 turning more concerned on the company’s outlook,” UBS Group AG analysts led by Spencer Leung wrote in a note on Friday. Hong Kong, which contributed 45 percent of the company’s total, “might have entered a new era as tourism peaked out,” they wrote.

Chow Tai Fook is cutting prices for some diamond jewelry in Hong Kong as it looks to reduce its gem-set jewelry inventories bloated by the weaker-than-expected sales, according to Catherine Lim, an analyst at Bloomberg Intelligence.

The company’s jewelry sales fell 16 percent in China and 33 percent in Hong Kong and Macau, as Chinese shoppers cut back on luxury spending amid a slowing economy and the government’s austerity campaign.

The jeweler plans to focus its expansion on the mainland by adding as many as 160 points of sales, slowed 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. predicted Hong Kong and Macau sales may continue to drag the overall performance in the 2016 fiscal year. Still, it’s positive on 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 Monday.