Event: The company released major operating data for the three months ended March 31, 2024. FY24Q4 Group's sales revenue was +12.4% YoY, with retail value in mainland China +12.4% YoY, and Hong Kong, Macau and other markets +12.8% YoY. In addition, same-store sales in mainland China were -2.7% year-on-year during the quarter, and same-store sales in Hong Kong and Macau, China were +4.5% year-on-year.
Same-store sales performance: Same-store sales in mainland China benefited from holiday demand, but same-store sales declined during the season due to a high base. However, Hong Kong, China benefited from the continued recovery of inbound tourism, with same-store sales +8.9% YoY and Macau same-store sales -7.1% YoY.
Franchise performance: Benefiting from the improvement in overall store efficiency and the opening of new stores over the past 12 months, the retail value of Chow Tai ?$#@$ Jewellery franchise stores in mainland China increased significantly by 18.3% during the quarter, and their contribution to related retail value increased to 70.4% (FY23Q4 was 67.2%).
Performance of each category:
1) Gold category: The same store sales of the gold category in mainland China were +3.4%, and the average price remained resilient, rising to HK$5,700 (FY23Q4 was HK$5200), mainly due to the fact that dragons meant good fortune in Chinese culture, and the market reacted strongly to gold products with the Year of the Dragon theme; gold category same-store sales in Hong Kong and Macau were +16.6% year-on-year, and the average selling price rose to HK$7,500 (FY23Q4 was HK$7,000).
2) Inlay category: Same store sales of inlay, platinum and karat gold jewellery in mainland China were -19.5%, sales in Hong Kong and Macau were -27.2% YoY. Average sales prices also declined. The Mainland was HK$8,200 (FY23Q4 was HK$8,400), and Hong Kong and Macau was HK$15,800 (FY23Q4 was HK$17,900). Due to non-essential consumer goods, the impact of the economic environment is relatively weak.
Store opening situation: Chow Tai Fook's jewellery retail stores in mainland China reached 7,403. A net total of 89 jewellery retail stores were closed in mainland China during the quarter, and a net total of 143 jewellery retail stores were opened in mainland China in FY24.
There were 145 retail Chow Tai ?$#@$ jewellery stores in Hong Kong, Macau and other markets, with a net opening of 1 during the quarter and a net opening of 10 in FY24. Combining other secondary brands and other regional markets, as of March 31, '24, the Group had a total of 7,782 retail locations, a net increase of 136 over March 31, '23.
Investment advice: The company will reshape the brand image, enhance brand appeal, build sales resilience, optimize the product portfolio, and improve operational efficiency. We expect FY24-26 net profit to be HK$77/88/10 billion, respectively, and the corresponding PE is 13/11/10x, respectively, maintaining a “buy” rating.
Risk warning: store expansion falls short of expectations, new store sales fall short of expectations, risk of gold price fluctuations, etc.