Profit up 139% on revenue up 17%, and 47 shops closed

The half, as the company files it

Profit was HK$2.15 billion, about $274.6 million, up 139%. Same-store sales grew 11% in mainland China, made of 7% in the first quarter and 17% in the second, and 38% in Hong Kong and Macau, made of 46% and then 30%. The group closed a net 47 shops, predominantly on the mainland.

The company said that key collections, including Cultural Blessings and Noir, recorded strong growth.

The margin did the work, not the sales

The gap between the two headline percentages is the result. Revenue rose 17% and profit rose 139%, which means the margin did most of the work rather than the sales.

Working back from the company's own figures, the comparable half produced roughly HK$11.01 billion of revenue and about HK$900 million of profit, a net margin near 8.17%. This half returns 16.69% on the same measure. The margin has roughly doubled in twelve months at a chain whose shop count fell.

That is what a gold-led half looks like at a retailer holding metal inventory into a rising price: the goods on the shelf appreciate faster than the cost of running the shelf, and every point of that lands below the revenue line.

Two markets crossing inside one half

The two markets crossed over inside the half, and that is worth separating from the headline. Hong Kong and Macau decelerated hard, from 46% same-store growth in the first quarter to 30% in the second. The mainland accelerated, from 7% to 17%.

A chain that was carried by its home market in the first three months was being carried by China in the second three, and the two lines are moving toward each other rather than apart.

The mainland is also where the shops are being shut, so the same market is producing better sales per surviving store and fewer stores at once, which is the intended shape of a closure programme rather than a retreat.

Forty-seven, or forty-nine

One figure needs disclosing rather than smoothing. This paper reported on 22 July, from the company's earlier quarterly update, that Chow Sang Sang had closed a net 49 shops in the first half and ended June with 776. The interim results now put net closures at 47.

The two numbers cover the same six months and this desk cannot reconcile them from the material it holds; the likeliest explanations are a scope difference between group and mainland, or a revision between an operational update and audited accounts, and neither is confirmed. Both are printed here.

The desk also notes what the release does not carry: no split between gold and gem-set jewellery, which in a half this obviously driven by metal is the number that would settle how much of the margin is price and how much is mix.