By Sherry Qin

Chow Tai Fook Jewellery Group's shares fell sharply in the wake of the company's soft sales in April and May and a weaker-than-expected dividend plan.

Shares of the Hong Kong-based company fell 7.7% early Friday to 8.72 Hong Kong dollars, taking losses to 25% this year so far.

The jewelry seller on Thursday reported a net profit of HK$6.50 billion ($832.2 million) for fiscal 2024, compared with HK$5.38 billion the previous year, while its topline grew 15% to HK$108.71 billion.

Despite core profit beating market expectations, Citi reckons elevated gold prices have damped sales momentum in the new fiscal year. So far for the first quarter ending June, same-store sales in China have declined 28% on year, while directly operated stores and franchise stores have fallen 19%.

Spot gold has risen 12% this year so far to $2,308.20 an ounce on early Friday, driven by geopolitical tensions and hopes for rate cuts.

Management expects sales to resume normal growth in the second half of fiscal 2025, as it takes one or two quarters for consumers to digest strength in gold prices.

Citi opens a 30-day downward catalyst watch on Chow Tai Fook, as it expects continuous same-store sales decline.

"However, we are not bearish," it added, as robust sales of fixed-price gold products show resilient demand and higher gold prices could help boost margin and support its bottom line. Citi maintains a buy call on the jewelry seller and keeps its target price at HK$14.20.

Meanwhile, Chow Tai Fook declared a total dividend of HK$0.55 a share, representing a total dividend payout ratio of 84.6%, "which might disappoint some investors given the lack of special dividend," Daiwa analysts said in a research note.

Write to Sherry Qin at

(END) Dow Jones Newswires

06-14-24 0018ET