
Market Review (2025-07-23)
Chow Tai Fook(1929 HK, HK$14.00, HK$138bn) 1Q26 improvement on track
Sequentially improving in SSSG. Chow Tai Fook (CTF) is a leading gold jewelry company in mainland China and HK. It reported improved 1Q26 (April - June 2025) numbers, with YoY declined in overall RSV (retail sales value) narrowing to 1.9% from 11.6% in 4Q25, as mainland China dropped 3.3% YoY, and HK & Macau market was up 7.8% YoY. Mainland China recorded a 3.3% YoY SSS decline in Q1, significant improvement from 13.2% drop last quarter, driven by higher ASP despite an 11% drop in sales volume. SSS of HK & Macau markets returned to a growth of 2.2% YoY, on the back of a largely flat performance in HK and a 9.5% increase in Macau.
Strong fixed-price gold sales. Given the strong performance of its Rouge Collection (傳福系列) and Palace Museum Collection (故宮系列), which were launched last year, CTF further expanded its footprint in the fixed-price gold segment, with the introduction of the Joie Collection (傳喜系列) in April this year. Sales of fixed-price gold products in 1Q26 increased by 21% YoY. Within the gold products category, RSV contribution from such high-GPM products jumped to 19.8% in 1Q26 from 15.8% in 1Q25. We believe the robust momentum of fixed price gold products could help margin resilience.
Aggressive network optimization continued. As of the end of June 2025, CTF operated a total of 6,337 stores globally, with over 97% in mainland China. The company recorded a net closure of 307 stores in 1Q26, following net closures of 142, 259, and 406 stores in 2Q25, 3Q25 and 4Q25 respectively. As per Mgt, their priority remained in enhancing the operation efficiency instead of pursuing store expansion but expecting the pace of store closures to slow down in FY27. Although the store count decreased 5% in 1Q26, overall RSV declined by only 2%, which suggested an improvement in SSS, reflecting the effectiveness of strategies aimed at optimizing the product mix and closing underperforming stores.
Our view: 1Q26 performance was largely inline with expectations. CTF has demonstrated remarkable success in brand upgrading and its fixed-price gold product strategy, with the newly launched Joie Collection receiving strong market acceptance. However, current high gold prices of US$3,300 per ounce, up 38% YoY, may weigh on GPM in FY26. Meanwhile, Luk Fook also showed the same trend of intensifying store rationalization, we believe this pattern is mirrored across most other peers, as weak demand persists in the low-end market. The counter is trading at 18x FY26E P/E.