Gold prices go up, gold stores go down: gold jewelry brands accelerate store closures

Photo source: Visual China

Blue Whale News, February 25 (Reporter Sun Yu)Different from the increase in gold investment and gold jewelry consumption during the previous round of gold price increases, now that gold prices are rising higher and higher, gold jewelry is no longer sold.

A set of data recently released by the World Gold Council showed that global gold jewelry consumption fell by 11% year-on-year in the past year. Among them, gold jewelry consumption in the China market in 2024 fell by 24% year-on-year.

Most gold stores in the industry feel the same way. Chow Tai Fook, Chow Sang Sang and Lao Fengxiang have experienced both sales and performance declines in the past year. What happened? Will the demand for gold ornaments improve in the future?

Gold prices rise, making gold ornaments difficult to sell

Driven by the global central bank’s gold purchase craze, the price of gold continued to rise. On February 25, spot gold once stood at US$2940 per ounce. The cumulative increase this year has exceeded 11%. The time has been slightly extended. Since 2024, spot gold has accumulated. The increase exceeds 42%.

Gold jewelry has both consumption and investment attributes. In the last round of gold bull market, consumers ‘purchases of gold jewelry continued to rise. Data from the China Gold Association shows that in 2010, my country’s demand for gold jewelry was 357 tons, and then rose all the way. By 2013, jewelry gold exceeded 716 tons, and demand almost doubled.

In 2024, the international gold price will increase by more than 25% for the whole year, but the demand for jewelry gold in my country’s gold market has reversed, 151 tons less than the previous year.

Specific to gold jewelry companies, operating data released by Chow Tai Fook shows that from April to September 2024, Chow Tai Fook Jewelry’s same-store sales in mainland China fell by 25.4%, and sales by pieces decreased by 30%. Same-store sales in Hong Kong, China and Macau, China fell by 30.8%, and the number of pieces of sales decreased by 33% year-on-year. Although gross profit margin increased to 31.4%, Chow Tai Fook’s overall sales fell 20.4% year-on-year to HK$39.4 billion.

From October to December 2024, Chow Tai Fook’s same-store sales decline narrowed, but sales still fell by more than 16% year-on-year, and same-store sales fell by nearly 30% year-on-year.

One consequence of the decline in sales is the longer inventory turnover days. Chow Tai Fook’s financial report data shows that the inventory turnover days at the end of September 2024 exceeded 400 days, and the inventory turnover days at the beginning of 2023 were about 300 days.

A clerk at a gold store told Blue Whale News: The price of gold is one day, rising higher and higher. More and more people come to the store to see jewelry, but most consumers are watching.” rdquo;

Another result of the decline in gold jewelry sales is that while costs such as rent and labor remain unchanged, the operating pressure on stores is increasing. Taking Chow Tai Fook as an example, official data shows that the total number of stores at the end of March 2024 was 7565. At the end of December, the total number of stores was 7065, and 500 stores were closed in nine months.

Chow Tai Fook is not an isolated case. Gold jewelry companies such as Chow Sang Sang, Lao Fengxiang, and Luk Fook Group have also been under pressure in the past year.

Zhou Shengsheng’s operating income in the first three quarters of 2024 was 10.8 billion yuan, down 13.5% year-on-year; net profit attributable to the parent company was 855 million yuan, down 21.95% year-on-year. Among them, franchise business revenue, which accounted for more than 70% of revenue, was 7.66 billion yuan, a year-on-year decrease of 19.75%, and wholesale sales of gold products fell by nearly 20%.

Lao Fengxiang’s revenue in the first three quarters of 2024 was 52.582 billion yuan, a year-on-year decrease of 15.28%; net profit attributable to the parent company was 1.776 billion yuan, a year-on-year decrease of 9.6%. Luk Fook Group’s operating income from April to September 2024 was HK$5.449 billion, a year-on-year decrease of 27%; operating profit was HK$536 million, a year-on-year decrease of 53%.

Will waiting consumers sell when gold prices weaken?

Many consumers told Blue Whale News that the price of gold is too high now and are prepared to wait until it drops before selling. rdquo; Some consumers also said that if they don’t buy it, they will be more expensive and they will not lose money when they start. When they are rich, they will use it as jewelry and when they are poor, and they will choose to buy it when they encounter something they like.

Data from the World Gold Council show that compared with platinum jewelry, diamond inlay, emerald pearls, etc., gold jewelry is still the main force of jewelry retail in China. Industry insiders pointed out that when economic uncertainty continues, residents ‘willingness to save increases sharply, and gold products benefit. However, gold jewelry, as a non-essential consumer product, is affected by residents’ income levels.

Judging from the consumption scenarios of gold jewelry, World Gold Council data shows that among my country’s gold jewelry consumption in 2024, self-wearing and weddings are the most important consumption scenarios, accounting for 27% and 24% respectively. Specific to wedding scenes, data released by the Ministry of Civil Affairs shows that the number of marriage registrations in 2024 will be 6.106 million pairs, a year-on-year decrease of about 20%, and the corresponding consumption demand for gold jewelry will decrease accordingly.

It is worth mentioning that ancient methods and joint names have become hot spots in the gold jewelry industry. Industry insiders pointed out that gold jewelry products are seriously homogenized, and gold stores need to work hard on differentiation and originality if they want to stand out.

Laopu gold, which specializes in ancient gold, has recently set off a rush to buy. The reporter learned from consumers at Laopu Gold Shanghai Yuyuan Store that Laopu gold is handmade and has limited output. The styles that have been here twice have been sold out. The store has not made reservations yet, so I can only come back and queue up to buy them. rdquo;

In addition, some consumers said that the price of the same style that Laopu Gold had two years ago has almost doubled. They regret not buying it at that time. Now that the price is high, they are hesitant to start.” rdquo; The increase in sales has promoted the growth of Laopu Gold’s performance. The company’s announcement shows that the net profit for the whole year of 2024 is expected to be 1.4 billion to 1.5 billion yuan, a year-on-year increase of 236% to 260%.

Laopu Gold Shanghai Yuyuan Store; Photo by Blue Whale journalist Sun Yu

In addition, co-branding has also become one of the factors driving sales of gold jewelry. The fire of “Nezha 2” has driven demand for the co-branded gold bracelet of Luk Fook Jewelry and “Nezha 1” on second-hand platforms. As the popularity of “Black Myth: Wukong” has increased, Chow Tai Fook’s joint gold jewelry Ruyi Jinhoop and joint gold pendant has also attracted market attention.