Luk Fook Holdings suffered sluggish same-store sales in 1QFY15

Forecast was right on the mark.

Luk Fook Holdings (International) Limited reported 1QFY15, which ended on June 30, 2014, that HK / Macau SSS was at -54% (decline) while China SSS was at -52% (decline) on high base.

According to a research note from Barclays, meanwhile, HK / Macau and China accounted for 78% and 22% of total revenue in FY14.

Management flagged the challenging SSS decline in 1Q end-Jun at its full-year FY14 results announcement. They mentioned a SSS decline of 56% in April to May, which implied June saw a relatively consistent level of SSS decline.

Notably, base effect was extremely high from 1QFY14, with 86% SSS in HK / Macau and 115% SSS in China due to the gold rush.

Here’s more from Barclays:

Overall gold SSS decline was at 65%, on gold rush comp of 134% SSS in 1QFY14. By geography, HK / Macau and China SSS decline were 65% and 59% respectively.

For HK / Macau, gold volume dropped by 63% which implied asp (average selling price) declined by 5%.

For China, volume dropped by 54% which implies asp declined by 11%. We think gold outlook will fare better in the upcoming quarters, especially in 2H (Oct-2014 onwards) as comps will ease sequentially q/q.

Overall gem-set SSS decline was at 19%, on 23% SSS in 1QFY14.

By geography, HK / Macau saw SSS decline of 20% on 21% SSS in 1QFY14 while China saw SSS growth of 5% despite a high base of 39% SSS in 1QFY14.

We believe gem-sets performance remains key to watch as their strength will bode well for margins (their gross margins are more than double of gold’s).