International gold prices have continued to attract market attention recently, driven in part by geopolitical tensions in the Middle East. However, despite the strengthening gold prices, shares of leading gold jewelry companies have been falling. At press time, Luk Fook Holdings (00590.HK), Chow Tai Fook (01929.HK), and Chow Sang Sang (00116.HK) dropped 5.02%, 3.51%, and 3.24%, respectively.
Luk Fook Holdings, for example, experienced a cumulative decline of 9.36% from June 17 to 18, with the total decline now exceeding 14%. The company recently announced it expects its net profit for fiscal year 2025 to fall approximately 40% year-on-year.
The profit decrease was mainly attributed to expanded gold hedging losses caused by soaring gold prices, alongside a high base effect from one-time gains last year related to the acquisition of King Tai Fook Group. Excluding the gold hedging losses, the adjusted profit decline narrows to less than 20%, and further excluding last year’s one-time gains reduces it to below 10%.
Similarly, Chow Tai Fook reported an 11.6% year-on-year decline in retail value for Q1 2025, with same-store sales in mainland China dropping 13.2%. China National Gold Group Corporation saw revenue fall 39.71% year-on-year to 11.003 billion yuan, with net profit attributable to shareholders down 62.96% to 135 million yuan. Chow Tai Seng’s revenue dropped 47.28% year-on-year to 2.673 billion yuan, with net profit down 26.12% to 252 million yuan.
The companies have also been closing stores. Chow Tai Fook’s main brand shut a net 397 outlets in Q1, reducing its total to 6,423 stores, while Chow Tai Seng closed a net 177 stores, bringing its total to 4,831.
Why Are Gold Jewelry Stores Struggling Despite Rising Gold Prices?
The surge in international gold prices has driven up procurement costs for jewelry companies, but retailers face constraints in raising selling prices due to consumer price sensitivity. When international gold prices reach 560–580 yuan per gram, retail prices must cover processing fees, rent, and labor costs. However, consumer acceptance drops sharply when prices exceed 700 yuan per gram, leading to significant sales declines.
Gold jewelry is a discretionary purchase, and consumers tend to pull back when prices rise. For example, a gold chain increasing from 5,000 yuan to 6,000 yuan can sharply reduce willingness to buy. Additionally, buyers often hold off purchases anticipating a future price correction, resulting in decreased foot traffic.
Many consumers are shifting to alternative investment options such as bank-issued gold bars or gold ETFs, which avoid the premiums charged at retail stores. Data shows that domestic gold jewelry demand in 2024 declined by 24% year-on-year, while investment demand for gold bars rose 20%. Younger consumers increasingly prefer alternatives such as second-hand gold jewelry or K-gold, and traditional wedding gold consumption has dropped from 52% to 37%.
