Chow Tai Fook (CTF), a leading jewelry brand in China, reported its 2Q27 (July to September 2026) operational performance. Below are the key takeaways from the investor call.

Mainland sales growth turns negative

2Q retail sales decelerated significantly on a YoY basis, down by 0.5% compared with a 15.1% growth in 1Q. Mainland China sales growth turned negative, falling 5.3% YoY (versus +10.7% YoY in 1Q). Same-store sales (SSS) volume in the mainland dropped 10% YoY, and same-store sales growth (SSSG) for weight-based gold jewelry slowed sharply to just 1.7% YoY (-36.3ppt QoQ). This was largely responsible for the overall sales decline, as Mainland China accounts for ~84% of total sales. In contrast, sales from Hong Kong, Macau and other markets remained robust, with retail sales growth of 33.2% YoY in 2Q (versus +44.8% YoY in 1Q). Hong Kong and Macau sales continued to benefit from favorable tourist footfall and exchange rates.

October is likely soft against a high base

The Mgt expects October to record a likely decline despite a potential purchase boost from National Day Golden Week, due to the high base created by consumer stockpiling last October. With volatile gold prices, willingness to purchase weight-based gold jewelry has decreased, and this category contributes about 67% of total sales. Consequently, we are cautious for 3Q should gold price fluctuations continue.

Promising store network optimization

The company has seen net closing of stores in Mainland China. The Mgt aims for fewer store closures in 2H this year compared to 1H, during which a net 9% (494 stores) of the total store count was closed. On the other hand, double-digit e-commerce growth partially offset the sales reduction from store closures. In addition, the company is elevating consumer experience by opening luxury-format boutiques. The total number of luxury-format boutiques in the mainland now stands at 13, and it targets to reach 50 by FY30. Overseas store openings are also progressing well, continuing to pursue selective expansion in key markets like Singapore and Malaysia.

Our view

Although the Mainland business may face short-term softness, we remain positive on its long-term value, as gold prices stay at historically high levels and the safe-haven demand strengthens in an uncertain macro environment. The company has a strong brand equity among consumers with innovative and distinctive jewelry designs. The ongoing shifting of product mix toward fixed-price jewelry, targeting 45% to 50% of retail value by FY3/30, is expected to further lift margins structurally. The stock currently trades at approximately 10.4x FY27E P/E. (Amelia Deng)