Investment Rating - The report maintains a "Buy" rating for Chow Tai Fook [6] Core Views - Chow Tai Fook's FY2026 Q1 same-store sales decline continues to narrow, with expectations for ongoing improvement [1] - The company is focusing on optimizing product structure and closing underperforming stores, which is expected to enhance sales performance [2] - E-commerce sales have shown strong growth, with a 27% year-on-year increase in FY2026 Q1 [2] - The company anticipates a 3% revenue growth for FY2026, with a slight decline in operating profit [3] Summary by Sections Financial Performance - For FY2026 Q1, Chow Tai Fook's overall RSV decreased by 1.9%, with mainland China RSV down by 3.3% [1] - The company closed 311 underperforming stores, bringing the total to 5,963 stores in mainland China [1] - The retail sales of gold products increased by 20.8%, contributing to the improvement in same-store sales [1] E-commerce Growth - Chow Tai Fook's e-commerce sales in mainland China grew by 27% year-on-year, accounting for 7.6% of total sales [2] - The company is leveraging promotional events like the 618 sales to boost e-commerce performance [2] Regional Performance - In FY2026 Q1, sales in Hong Kong and Macau increased by 7.8%, with Macau showing a notable 9.5% growth in same-store sales [2] Revenue and Profit Forecast - The company expects FY2026 revenue to grow by approximately 3%, while operating profit is projected to decline by 2% to HKD 14.4 billion [3] - Chow Tai Fook's net profit for FY2026 is forecasted to increase by 26% to HKD 7.45 billion [3]

Core Viewpoint - The article discusses the transformation and challenges faced by Chow Tai Fook (周大福), a leading Hong Kong jewelry brand, amid rising gold prices and changing consumer preferences. Group 1: Financial Performance - For the fiscal year ending March 31, 2025, Chow Tai Fook's revenue decreased by 17.5% to HKD 89.656 billion [2] - The sales of gold-priced products fell nearly 30%, while fixed-price products saw a doubling in sales, significantly exceeding market expectations for profit [3] - Operating profit increased by 9.8% to HKD 14.746 billion [4] - Net profit decreased by 9% to HKD 5.916 billion due to losses from gold loan contracts amid rising gold prices [5] Group 2: Market Trends and Consumer Behavior - As of March 31, gold prices had risen over 40% in the past year, leading to a 32% drop in gold jewelry consumption in China [10] - The trend towards lightweight consumption is emerging, with low-priced products gaining popularity in live-streaming e-commerce channels [12] - Chow Tai Fook's sales of gold-inlaid diamond products doubled, while sales of platinum and K-gold products fell by 13.8% [14] Group 3: Strategic Transformation - In April 2024, Chow Tai Fook announced a brand transformation plan, focusing on product iteration and hiring a former Tiffany & Co. design director [20] - The company launched the "Chuanfu" and "Forbidden City" series, achieving cumulative sales of HKD 4 billion [21] - Chow Tai Fook is actively collaborating with popular IPs to attract younger consumers [22] Group 4: Operational Adjustments - Chow Tai Fook's store count expanded to 7,510 by the end of 2023, with over half located in third-tier and lower markets [30] - The company faced declining same-store sales, with a drop of over 30% in the fiscal year 2025 [33] - The company closed 896 stores, focusing on improving store quality and efficiency [35] Group 5: Future Outlook - Chow Tai Fook's inventory decreased by 14% to HKD 55.4 billion as of March 31, indicating a focus on managing stock levels [44] - The company is expected to maintain a cautious approach to channel operations in the 2026 fiscal year, with a conservative sales outlook [43] - The brand aims to enhance its high-end retail experience by opening new flagship stores in prime locations [51]

Core Viewpoint - The Hong Kong-based jewelry leader Chow Tai Fook is undergoing a transformation in response to rising gold prices and changing consumer preferences, aiming to optimize its product and channel structure to improve overall performance [1][3][5]. Financial Performance - For the fiscal year ending March 31, 2025, Chow Tai Fook reported a revenue decline of 17.5% year-on-year to HKD 89.656 billion [2]. - The sales of priced products doubled, while the sales of gold-priced products fell nearly 30%, leading to an operating profit increase of 9.8% to HKD 14.746 billion [3]. - Net profit decreased by 9% to HKD 5.916 billion due to losses from gold lending contracts amid rising gold prices [4]. Market Trends - The gold price increased by over 40% in the past year, leading to a 32% year-on-year decline in gold jewelry consumption in China [8]. - The trend towards lightweight consumption is emerging, with lower-priced products gaining popularity in live e-commerce channels [10]. Product Strategy - Chow Tai Fook's sales of gold-inlaid diamond products doubled, while sales of platinum and K-gold products fell by 13.8% [12]. - The proportion of priced products in the gold jewelry category increased significantly from 7.1% to 19.2% [13]. - The company is focusing on high-end retail experiences and has launched new product lines, including collaborations with popular IPs to attract younger consumers [15][18]. Store Expansion and Optimization - Chow Tai Fook's store count expanded rapidly to 7,510 by the end of 2023, with over half of the stores located in lower-tier cities [24]. - The company closed 896 stores in the fiscal year 2025, focusing on improving store quality and efficiency [27]. - New stores are strategically located in premium areas, achieving sales levels close to the overall average for the first time in years [29]. Future Outlook - Chow Tai Fook's inventory balance decreased by 14% to HKD 55.4 billion as of March 31, indicating a focus on strict procurement and inventory management [34]. - The company maintains a cautious sales outlook for the upcoming year, with expectations of reduced store closures [32][33].