Hong Kong Jewelers Warn of Slowdown

RAPAPORT... Hong Kong's largest jewelry retailers expect sales growth to slow during the important holiday season in light of recent US-China trade tensions and the depreciation of the yuan currency.Same-store sales at Luk Fook dropped by a single-digitpercentage in Hong Kong and Macau in October and the first three weeks of November, and by double digits in mainland China, the company reported last week.  "Market sentiment was adversely impacted by the recentUS-China trade war as well as the depreciation of [the yuan]," Luk Fook explained. "Therefore, the group remains prudent about its business developmentin the second half of the financial year." The yuan has depreciated 5% against the Hong Kong and US dollars since July 1, after the US raised tariffs on its imports of Chinese goods. That hasrestricted Chinese tourists' spending abroad, and dampened luxury sales inHong Kong, where retailers are largely reliant on purchases by visitors from the mainland. Luk Fook's net profit fell 65% year on year to HKD 237.7 million ($30.4 million) in the fiscal half-year that ended September 30, even as sales grew across all regions. The slump resulted from the company writing off a considerable amount due to fluctuation in currency conversion, it reported in a statement Wednesday. Revenue jumped 25% to HKD 7.86 billion ($1billion) for the half-year, while same-store sales - which discount shop openings - increased 18%. Shares in Luk Fook slid 7% following the announcement.   Chow Tai Fook shares fell by a similar margin after currency conversions led to its net profit plunging 89% to HKD 286.1 million ($36.6 million) during the fiscal first half. The company cautioned that sales growth would likely slow in the coming months after revenue grew 20% to HKD 29.7 billion ($3.8 billion) in the six months ending September 30.  "Such growth momentum is expected to be moderated in [thesecond fiscal half ending March 2019] as the escalating comparison base, risingUS-China trade tensions, and foreign-exchange fluctuations could cloud theperformance," it said Thursday. Retail sales in the region tend to rise in the second fiscal half, which includes the busy shopping season for the Chinese New Year, which falls on February 5. Image: Luk Fook store, Hong Kong. (Tusginewko)