Chow Tai Fook eyes US amid lacklustre China sales

HONG KONG: Chow Tai Fook Jewellery Group Ltd plans to expand in the United States market by selling diamonds to retailers there, as it seeks to offset effects of a slowdown in China that has hurt luxury sales and led profits to plunge.

The world’s largest publicly-traded jewellery chain planned to start the new US wholesale business within a year and had set up a team to conduct feasibility studies, said Chow Tai Fook managing director Kent Wong.

Unlike the company’s US unit Hearts on Fire, which mainly sold its own-branded diamond jewellery to franchisees, Chow Tai Fook would sell polished and rough diamonds to other retailers, he said.

“We are interested in the US market because it has the largest demand for diamonds in the world. It contributes to 40 per cent of diamonds sales,” said Wong.

Chow Tai Fook in 2014 bought Hearts on Fire for US$150 million (RM609.73 million) in a bid to introduce the US luxury diamond brand to mainland China, a move that’s met challenges as the country’s slowdown damped the buying habits of highend consumers.

The retailer saw net income slump 46 per cent for the year ended March, as Chinese tourists also began to skip the city for other shopping destinations.

Chow Tai Fook’s venture into the US might come with challenges, said Hannah Li, senior analyst in UOB Kay Hian Ltd based, here. “Their strategy reflects the jeweller’s lack of confidence in the Greater China market.”

“The company’s not expanding into a familiar market, but it’s considering a lower-margin, wholesale business in a new market where it needs a lot of time to expand its business networks,” she added.

Since acquiring Hearts on Fire, the company has expanded the brand in mainland China with about 140 sales locations, Chow Tai Fook reported last month. About 80 per cent of Hearts on Fire’s revenue are from its wholesale business to franchisees, according to the company.

Rather than breaking into a brandnew retail market on its own, the new wholesale business would allow Chow Tai Fook to test the waters, said Wong. Bloomberg