Author | Wang Xiaojuan

In today's weather is good. Today's weather is good.

The soaring price of gold did not continue to drive the hot wave of consumers' "grabbing gold", and the performance of gold shops has not returned to its former glory.

Even Chow Tai Fook, known as the "number one Chinese jewelry brand", was not spared. The performance of Chow Tai Fook in the second quarter of this year (first quarter of the 2025 fiscal year) reflects this.

The performance announcement shows that Chow Tai Fook's retail sales in the second quarter decreased by 20% year-on-year. Among them, the retail sales in China's mainland market, which accounts for more than 85% of its business, decreased by 18.6%; while Hong Kong, Macau, and other markets in China fell by 28.8%.

2023 was a big year for gold consumption. Last year, buying gold trinkets and hoarding small gold bars became one of the most popular financial management methods among young people. Buying gold jewelry also became one of the hottest topics on social media. With the soaring gold price, buying gold is no longer labeled as "for middle-aged women", but instead has become a smart choice.

On the other hand, the weddings that were postponed in the past few years due to the pandemic were all held last year, coinciding with the Chinese lunar year of the Dragon, resulting in the highest number of marriages in recent years. According to data from the Ministry of Civil Affairs, the number of registered marriages handled nationwide last year was 7.682 million couples, an increase of 12.4% compared to the previous year.

Gold jewelry as a necessary consumer item for marriage naturally drives strong consumption.

The "China Gold Jewelry Market Report 2024" released by the China Gold Association shows that in 2023, the retail sales of gold and silver jewelry by units above quota reached 331 billion yuan, a year-on-year increase of 13.3%, reaching a historical high. In terms of gold jewelry consumption, in 2023, the consumption of gold jewelry in China was 706.48 tons, a year-on-year increase of 7.97% compared to 2022.

This prosperity is also reflected in the performance of many jewelry stores.

Chow Tai Fook's 2024 fiscal year performance report (ending March 31, 2024) shows that in that fiscal year, Chow Tai Fook achieved a turnover of 108.713 billion Hong Kong dollars, an increase of 14.82% year-on-year; net income attributable to shareholders reached 6.499 billion Hong Kong dollars, an increase of 20.71% year-on-year.

Moreover, in order to catch up with the wave of gold consumption, Chow Tai Fook has also rapidly expanded in the past two years. In the 2024 fiscal year, Chow Tai Fook opened 143 more stores, achieving the goal of opening 7,000 stores a year ahead of the originally scheduled 2025 fiscal year.

The prosperity of the industry is also reflected in the performance of its peers. Although smaller in scale, another jewelry store, Chow Sang Sang, also experienced a 28% increase in revenue in that fiscal year.

Unfortunately, this prosperity did not last long.

This year, the gold price has risen to historically high levels. For example, on September 12, Chow Tai Fook sold gold at 746 yuan/gram, while other brands were also around 740 yuan/gram. This pricing has deterred many consumers, and with the previous trend of rising prices, much of the demand for gold jewelry has already been advanced, leading to a return to calm in gold jewelry consumption.

The overall market is shrinking, and Chow Tai Fook, the leader, is the first to be hurt.

In addition to the decline in performance, Chow Tai Fook is also closing more stores. In the second quarter, it closed 91 stores, and a total of 180 stores have been closed in the first half of this year.

The once successful 'store expansion strategy' of Chow Tai Fook is failing. Opening more stores will only reduce the sales of each store. In the second quarter, same-store sales of Chow Tai Fook's mainland China direct-operated stores and franchise stores decreased by 26.4% and 19.1% respectively, while same-store sales in China's Hong Kong and Macau decreased by 30.8% year-on-year.

Therefore, despite the record high gold prices, it seems that the days of gold shops are not going well.

Chow Sang Sang's revenue and net income in the first half of the year also declined at a double-digit rate: comprehensive revenue was 11.313 billion Hong Kong dollars, a 13% year-on-year decrease; attributable net income was 0.526 billion Hong Kong dollars, a 36% year-on-year decrease.

Chow Tai Fook faces a more complex situation. In addition to the impact of weak gold jewelry consumption, Chow Tai Fook also experienced issues such as 'spokesperson accidents' this year, which have become factors affecting performance.

In June, Chow Tai Fook hit the hot search list with the phrase 'Shenzhen factory production halt,' although it was later clarified as a relocation rather than a halt, many employees were still laid off during this process, leading to an overall reduction.

The situation faced by companies like Chow Tai Fook is mainly the result of changes in consumer trends.

Since the beginning of this year, many brands have expressed in their financial reports that they can clearly feel that consumers at all levels have become more rational.

In uncertain times, faced with gold, which is not a necessity of life, consumers naturally become more cautious.

In the early stages of the rise in gold prices, many people would purchase due to investment opportunities. Now that the price has risen to the level of luxury goods, the investment value is extremely limited; purely for consumption, last year's popular "It's not that I can't afford XX, but XX offers better value for money" explains well the current mentality of consumers.

Furthermore, rational consumers are unwilling to pay high design fees and processing fees to gold shops, so some consumers choose to buy gold bars directly from banks to make gold jewelry.

The market is always like this, able to generate heat waves, but also quickly extinguish, constantly changing.

For companies to successfully navigate through cycles, they need to anticipate consumer sentiments in advance and have enough adaptability.