Chow Tai Fook chases Chinese tourists’spend abroad

Chow Tai Fook Jewellery Group Ltd. is looking for those Chinese tourists spending overseas to reverse the effects of the economic slowdown in China, which has cost the luxury goods group a 46 percent drop in annual profit in the last year alone.

As reported by the the jewellery and accessories group earlier this month, weak retail sentiment in Hong Kong and Macau, and a decline in tourism, especially from mainland China due to the stronger U.S. dollar, have been the main factors for the decreasing sales.

Meanwhile, retail sales in newer markets such as the U.S., Taiwan and South Korea, grew 26 percent in the fiscal year ending 2016, proving the point for the retailer’s strategy to “expand footprint in overseas market to grasp opportunities from the booming Chinese outbound tourism,” it said.

Chow Tai Fook needs tourists spend to reverse 46 percent profit drop

As highlighted by local market experts, the retailer is aiming to capture a shift in Chinese shopping habits as the country’s slowdown has damped the demand for luxury goods. Hong Kong retailers were also hurt as mainland Chinese tourists, who account for almost a third of luxury spending globally, skip the shopping mecca for other destinations.

“The increasingly affluent and sophisticated Chinese consumers continue to look for more personalised products and shopping experience,” the company said in a statement last week. “Lifestyle and leisure spending becomes the trend, with strong outbound tourism boosting the consumption abroad.”

Last week the jeweller reported net income that fell to 2.94 billion Hong Kong dollars (379 million dollars) for the year ended March, 31.

The retailer’s efforts to grow beyond mainland China, Hong Kong and Macau may reap little benefit for now, as its overseas presence remains small relative to those core markets, said Bloomberg Intelligence analyst Catherine Lim. “The inclination of Chinese travellers to buy jewelry from a brand readily available in Hong Kong and China may be low, as they are more likely to buy international brands or even try local brands from their destination,” she noted in a research note.

Hong Kong retail sales fell 12 percent in the first quarter, with jewelry and watch sales plummeting nearly double that, contributing to Chow Tai Fook’s lowest profit since 2010. Mainland Chinese tourists to Hong Kong, who accounted for more than 70 percent of the total in the first four months this year, have dropped 13 percent in the period compared to a year ago, according to the city’s tourism board.

Mainland China contributed 60 percent of Chow Tai Fook’s sales in fiscal 2016, with the remainder from Hong Kong, Macau, and other markets, which the retailer doesn’t break down. The company still sees growth in China, it said.