Core Viewpoint - CTFJ reported a 1.9% YoY decline in retail sales value (RSV) for 1QFY26, indicating a sequential recovery after previous weaknesses, supported by a net reduction of 311 stores, reflecting effective strategies to close underperforming locations and redirect traffic to better-performing stores [1][2] Group 1: Financial Performance - The RSV decline of 1.9% YoY during April to June 2025 aligns with preliminary figures, with June showing slightly worse performance than May due to earlier festivals and sales campaigns [2] - Despite the decline, CTFJ's strategies are expected to lead to a positive same-store sales growth (SSSG) for FY26, with a target of mid-single-digit growth [2][6] Group 2: Store Performance and Strategy - CTFJ experienced a net closure of 307 stores in 1QFY26, bringing the total to 6,337 stores, a 16% YoY reduction, primarily affecting franchised stores in lower-tier cities [3] - The SSSG of franchised stores remained flat, outperforming self-operated stores, indicating successful resource reallocation from closed underperforming stores [3] Group 3: Brand Development - CTFJ is focusing on wealthier market segments with the launch of premium product lines, such as the CTF Joie Collection and High Jewellery Collection, which could enhance brand value and boost sales of mainstream products [4] Group 4: Valuation and Outlook - The target price (TP) has been raised to HK$15.2 based on a 15x FY27E P/E, reflecting confidence in CTFJ's strategies to maintain its market leadership and improve earnings through better SSSG and reduced gold hedging losses [6] - The expected FY26E dividend yield of 5.6% is considered attractive [6]

Financial Data and Key Metrics Changes - Revenue declined by 17.5% to HKD 89.7 billion, while operating profit grew by 9.8% to over HKD 14.7 billion [5] - Gross profit margin increased by 550 basis points to 29.5%, and operating profit margin expanded by 400 basis points to 16.4% [5] - Profit attributable to shareholders decreased by 9% due to losses from gold loan contract revaluation amid gold price volatility [5] Business Line Data and Key Metrics Changes - Revenue from fixed price gold products surged by 105.5% year on year, contributing significantly to gross profit margin improvement [10] - The contribution of fixed price product categories to the group's revenue expanded to approximately 29% from 19% a year ago [27] - Same store sales in Mainland declined by 19% in self-operated stores and 14% in franchise stores, while Hong Kong and Macau saw a 26% decline [28] Market Data and Key Metrics Changes - E-commerce sales in Hong Kong and Macau increased by 91%, driven by a revamped brand website [21] - Revenue from other markets grew by over 9%, primarily from Singapore, Malaysia, and Thailand [22] - E-commerce contributed 6% to retail sales value and 14% to volume in the Mainland business [19] Company Strategy and Development Direction - The company is focused on brand transformation and product optimization, with plans to unveil further differentiated signature collections [12] - New image stores are being strategically opened in prime locations to enhance customer experience and sustain market leadership [12] - The company aims to expand its presence in high-potential new territories while revitalizing existing markets [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the upcoming year, expecting continued momentum in same store sales growth [28] - The company is closely monitoring macroeconomic conditions, gold price movements, and government policies to inform business decisions [41] - The commitment to brand transformation is expected to bolster long-term growth prospects and increase shareholder returns sustainably [41] Other Important Information - The company launched the Zhuhai Folk Jewelry Sustainability 2049 blueprint, integrating sustainability into operations [8] - The CTF Rouge collection achieved approximately HKD 4 billion in retail sales value, exceeding expectations [10] - The return on equity reached 21.9%, showing sustained improvement against a five-year historical average of around 18% [40] Q&A Session Summary Question: What are the expectations for same store sales growth? - Management expects same store sales growth to return to positive at some point in fiscal year 2026, supported by current observations [28] Question: How is the company managing its capital structure amid uncertainties? - The company is maintaining a disciplined and prudent approach to managing its capital structure and gearing ratio to enhance financial stability [40] Question: What are the key drivers for e-commerce growth? - The establishment of an in-house live streaming studio and enhanced social media promotions significantly contributed to e-commerce growth [19]