Gold Price Pullback Boosts Chow Tai Fook Revenue but Challenges Profit Structure

The recent gold price pullback has created an unexpected opportunity for jewelry retailers, particularly Chow Tai Fook Jewellery Group (01929.HK), which reported a 15.1% year-on-year growth in revenue for the first quarter of fiscal year 2027.

The company's mainland China market contributed 83.6% of revenue and grew by 10.7%, while Hong Kong, Macau, and other markets performed even more strongly, with retail value surging 44.8%. Same-store sales growth was also striking, with a 19.6% increase in mainland China directly-operated stores and 15.7% in franchised stores.

The key driver behind this growth is the sharp decline in gold prices, which fell by 8% in USD-denominated terms and 10% in RMB-denominated terms for the first half of the year. This has lowered the purchasing threshold for consumers and restocking costs across the industry supply chain.

However, behind the bright revenue figures, Chow Tai Fook's brand transformation strategy is facing headwinds. The company's fixed-price jewelry products significantly underperformed gold-by-weight products this quarter, with a 5.2% decline in same-store sales volume at mainland China directly-operated stores.