Effective operations drive SSSG improvement – Lung Fung Group, a Hong Kong-based cosmetics and healthcare products chain, reported strong 1Q27 performance. Sales across its 31-store network increased by 21.2% YoY to HK$829mn, driven by expanded retail space and SKU optimization aimed at enhancing consumer appeal. However, the growth tapered from 33.2% in FY3/26, partly due to adverse weather conditions that reduced tourist footfall between April and June. Meanwhile, same-store sales growth (SSSG) across its 25 comparable stores reached 10.3% YoY, a significant improvement from 3.9% in FY3/26.

Customer footfall remains resilient – Looking ahead, the strong growth momentum in tourist arrivals is expected to continue as the summer holiday season begins, followed by the October Golden Week.  According to the Hong Kong Tourism Board, total visitor arrivals in 1H26 increased by 13% YoY, slightly above the 12% YoY growth recorded for the full year of 2025. 

Expanding beyond Hong Kong – The Mgt has set a full-year target of opening 6–7 new stores. It is estimated that six additional stores could lift topline by roughly 10% of additional revenue. The company is also planning to expand into Macau and Southeast Asia leveraging its brand equity.

Our view:

Easing rental conditions and sustained visitor arrival momentum have created a favorable  environment for Lung Fung's offline retail model. We expect the company's topline to maintain double-digit YoY growth in 2Q27, underpinned by both store expansion and operational leverage, as reflected in higher SSSG. In addition, the summer peak season in July and August is set to provide further support to near-term performance. The stock currently trades at 5.5x FY3/27E PE. (Amelia Deng)