Chow Tai Fook Jewellery Group Ltd. has announced profits that fell slightly short of expectations amid a challenging economic environment. This situation raises concerns about the company’s longer-term forecasts following China’s recent elimination of a longstanding tax rebate on gold.
In its latest filing, the leading jewellery retailer in China reported a flat first-half net income of HK$2.5 billion ($321 million), missing the analyst estimate of HK$2.6 billion. A slight decrease in gross margin to 30.5% was noted; nevertheless, the company mentioned an improved product mix involving higher-margin fixed-price jewellery and the appreciation of gold prices as beneficial factors.
During this period, the prices for fixed-price gold jewellery in mainland China increased, thanks to efforts to offer products that stand out in comparison to competitors like Laopu Gold Co.
Chow Tai Fook is confronting various mounting challenges including fluctuating gold prices, a slowdown in consumer spending, and growing competition from local luxury jewellery brands. Despite these obstacles, the company expressed confidence in its recovery as it approaches the second half of the fiscal year 2026, even amid the prevailing short-term industry pressures.
The future outlook remains ambiguous following China’s removal of a long-time tax incentive for gold purchases on November 1. The motivation behind this policy shift was to enhance government revenue in the face of a sluggish real estate market. This adjustment could potentially increase gold purchase costs for consumers and exert pressure on retailer profit margins.
Chow Tai Fook has previously adjusted some of its product prices in response to increases in gold costs. Notably, its shares have surged by 127% so far this year.
