Luk Fook Holdings reported a 6% drop in profit to $ 163.6 million in the fiscal year ended March 31, 2013, Rapaport reported. The company explained the decline in financial performance with a reduction in profit margins and a disproportionate increase in the cost of renting retail space in Hong Kong and Macau.
The group's revenues for the period under review showed an increase of 13% to $ 1.73 billion, due to the expansion of the presence in the mainland markets and the growth of sales to Chinese tourists in Hong Kong.
Luk Fook reported that Hong Kong accounts for 65% of total sales, while in the previous fiscal year this share was 69.5%.
Luk Fook's revenue in Hong Kong rose 5% year-on-year to $ 1.12 billion, while revenue in mainland China jumped by 29% to $ 366.3 million. Revenue in other Luk Fook divisions (Macao, Singapore, the US and Canada) grew by 30% to $ 238.9 million.
Of the total revenue, the group accounted for 81.5% of retail sales, 15.1% for wholesales, and licensed revenue accounted for 3.4% of revenue.
The cost of sales for the year increased by 16% to $ 1.36 billion, and gross profit margin fell to 21.1% compared to 23.2% for the previous fiscal year.
Luk Fook said that in the light of economic uncertainty, she adheres to a cautious forecast for the jewelry business. In the long term, sales growth will provide an expansion in the mainland China market, however, slow economic growth in China poses a threat to the growth of the industry in the short term. According to the company, the year 2014 will be difficult.