Hong Kong-based jeweler Tse Sui Luen (TSL) has raised doubts about its ability to remain operational as a "going concern", citing a sharp decline in natural diamond jewelry demand and soaring gold prices.
Struggling Financials
For the first half of its fiscal year, ending September 30, TSL reported:
- A net loss of HKD 43.8 million ($5.6 million).
- A 36% drop in sales, down to HKD 864.4 million ($111 million).
“The jewelry industry has been hit hard by declining consumer demand for natural-diamond jewelry, particularly in mainland China,” TSL explained. Compounding this is the impact of record-breaking gold prices, which are discouraging luxury purchases.
Mainland China and Beyond
Mainland China, TSL’s largest market, saw a 37% drop in revenue to HKD 548.2 million ($70.4 million). Meanwhile:
- Sales in Hong Kong and Macau fell 42% to HKD 236.8 million ($30.4 million) as fewer visitors opted to purchase luxury goods locally.
- Many local residents are instead spending on the mainland or abroad, further reducing sales in these regions.
Survival Strategy
To mitigate losses, TSL is:
- Closing underperforming stores, particularly in Hong Kong.
- Reducing staff significantly.
- Cutting inventory levels to match the weakened market demand.
“The depressed retail market in mainland China remains a significant challenge,” the company noted. The dual pressures of declining diamond jewelry interest and reduced 24-karat gold purchases continue to impact its bottom line.