China's Slowdown Is Killing Its Luxury Market

• Chow Tai Fook Jewellery Group, the world's largest publicly traded jewelry chain, reported its first half of the year profit plunged 42 percent.
• The Hong Kong-based conglomerate has 2,000 jewelry retail outlets in mainland China and a presence in several other countries.
• Macau Daily Times noted Chow Tai's profit was hurt by "weak demand" in Hong Kong and Macau and an economic slowdown in China.

Many investors are unfamiliar with the Chow Tai Fook Jewellery Group, but it is in fact the world's largest publicly traded jewelry chain.

The company reported its first half profit for 2015 plunged 42 percent due to weak demand in Hong Kong and Macau and an economic slowdown, Macau Daily Times noted.

Chow Tai Fook's net income fell to HK$1.56 billion ($201 million) for the six-month period ending in September. In the same period a year ago, the company's net income was HK$2.69 billion. Sales for the six-month period fell 4.1 percent from a year ago to HK$28.1 billion, while same-store sales fell 18 percent in Hong Kong and Macau, but rose 0.1 percent in mainland China.

The company warned investors back in early November that its profits are expected to decline due to the weakness in Hong Kong and Macau, along with an unfavorable sales mix of lower-margin gold products and unrealized hedging losses.

Related Link: 3 Reasons Tiffany & Co. Is The Best Positioned Luxury Brand

Is Tiffany Winning Where Chow Tai Fook Is Failing?

Tiffany & Co. TIF reported its third quarter results on Tuesday. Commenting on the Asia-Pacific region, the company said that total sales rose 6 percent in the third quarter and comparable store sales rose 2 percent. Total sales and comparable store sales in the year-to-date period rose 6 percent and 4 percent, respectively.

On a constant-exchange-rate basis, Tiffany said that it saw "healthy sales growth" in China, but sales declined again in Hong Kong and Macau.

Tiffany also announced a total sales and comparable store sales growth in Japan of (FX-neutral) of 34 percent and 24 percent, respectively. According to a report by Bloomberg, Tiffany is "eating Chow Tai Fook's breakfast" as Chinese tourists accounted for a "significant" portion of the growth Tiffany experienced in Japan.

Bloomberg also noted that Chinese goods don't have a "particularly good" reputation among Chinese shoppers, which might also explain why Tiffany is seeing success in a region where Chow Tai Fook "should be cleaning up."