Luk Fook Holdings Intl Aktie

Ladies and gentlemen, thank you for standing by, and welcome to the Luk Fook FY 2025/'26 Interim Results Presentation. Please also note today's event is being recorded.

At this time, I would like to turn the conference call over to Ms. Joanne Ho. Please go ahead, Joanne.

Good morning, everyone. I'm Joanne from Luk Fook IR team. Thanks for taking the time to join us today for our financial year 2026 interim results. It's great to have you all here with us. Joining me today is Dr. Kathy Chan, our Executive Director and Group's CFO. Kathy will take you through the interim results. After that, we will move straight into the Q&A session. The call will be conducted in English, and the presentation deck is already available for download on our website.

With that, let me hand over to Kathy for the detailed presentation.

Thank you, Joanne. Good morning, ladies and gentlemen. Thank you for joining Luk Fook's FY 2025/'26 interim results presentation. I would like to start with looking at our financial highlights, followed by financial review and then our future plans and strategies. The details are recorded in the corporate presentation, which has been uploaded to our website.

Let's look at Slide 4 about the financial highlights first. Despite sustained geopolitical tensions and trade uncertainties and clouding the macroeconomic outlook and driving gold prices continued to move upward, the group's performance across all regions remained outstanding. Underpinned by effective product differentiation and sales strategies, with the surge in sales of fixed-price jewelry products, the group's revenue increased by 25.6% to HKD 6.8 billion compared to the same period last year.

In addition, the favorable operating leverage effect lifted the operating profit margin by 1.6 percentage points to 11.4%, thereby boosting the operating profit by 45.4% to HKD 780 million. The group's profitable -- profit attributable to equity holders increased by 42.5% to HKD 619 million. The basic earnings per share rose by 41.9% to HKD 1.05. Proposed interim dividend is HKD 0.55 per share with dividend payout ratio of 52%. There was a net decrease of 174 shops globally, including a net decrease of 173 Luk Fook shops and 1 3DG Jewelry shop.

Next slide shows the movement in operating profits. Benefited from the rise in gold prices and the increased sales mix of fixed-price jewelry products with high gross margin, the group's overall gross margin increased by 2 percentage points to 34.7%. In fact, this gross margin is a record high for both interim and annual results. As a result, the group's gross profit increased by 33.2% to HKD 2.37 billion. The operating expenses increased by 12.4% to around HKD 1.3 billion. Thanks to revenue growing at a faster pace, the group benefited from operating leverage with the TOE ratio improving by 2.2 percentage points to 19.1%. The surge in gold prices resulted in the widening gold hedging losses of HKD 409 million during the period. As a result of all the above, the operating profit rose by 45.4% to HKD 780 million.

Now let's go into the details of our financial performance. On Slide 9, our inventory balance grew to around HKD 12.3 billion as at end of September 2025. The increase was mainly due to the rise in gold products category. Therefore, both the average and closing inventory turnover days increased by over 60 days year-on-year, reaching a total of over 490 days by end of September 2025. However, if comparing to first half of financial year 2025, the average inventory turnover period actually dropped by 14 days. Net borrowings increased by 282% to around HKD 1.1 billion, mainly due to the increase in gold loans. ROE rose by 2.5 percentage points to 9.1%.

Now let's look at Slide 12 for the performance analysis by market. Revenue from the Hong Kong, Macau and overseas market increased by 9.9% to HKD 3.86 billion during the period under review, accounting for 56.4% of the group's revenue. Its segment profit increased by 37.3% to HKD 587 million, accounting for 68.2% of the group's total, while its segment profit margin was 15.2%. The wholesaling business in the Mainland market showed a significant improvement in the first half of the financial year. As a result, revenue from the Mainland market increased by 54.2% to HKD 2.98 billion, accounting for 43.6% of group's total revenue. Its segment profit increased by 118.2% to HKD 274 million, accounting for 31.8% of group's total and its segment profit margin was 9.2%.

Slide 13 shows our revenue and segment profit by business. Retailing business was the main source of revenue of the group. The group's retailing revenue increased by 12.8% to HKD 5.26 billion accounting for 76.8% of group's total revenue. Its segment profit increased by 24.6% to HKD 477 million, accounting for 55.4% of the total and its segment profit margin was 9.1%.

Driven by the group's ongoing efforts to broaden product categories under wholesaling business, coupled with successful product differentiation strategy, the new products achieved incredible sales performance. Therefore, the group's wholesaling revenue significantly rose by 190.6% to HKD 1.12 billion, accounting for 16.3% of the group's total revenue. Its segment profit turned around from a loss to a profit of HKD 108 million, accounting for 12.5% of the total, and its segment profit margin was 9.7%. As the segment margin -- segment profit of wholesaling business included profits from intersegment sales to self-operated shops, if including intersegment sales in the denominator, its segment profit margin would be 4.4%. Licensing income increased by 16.6% to HKD 471 million due to the improved sales in Mainland, accounting for 6.9% of group's total revenue. Its segment profit margin was 58.6%, while its segment profit increased by 15.5% to HKD 276 million, accounting for 32.1% of the total.

Let's look at the profit analysis on Slide 14 now. During the period under review, the average international gold price in U.S. dollar per ounce increased by nearly 91% year-on-year, leading to a decline in gold sales by weight. As a result, sales of gold and platinum products increased by 11% only to around HKD 4.1 billion, accounting for 64.3% of overall sales amount. Its gross margin increased by 2.8 percentage points to 30.3% because of the rise in gold prices. Gross profit from gold and platinum products, therefore increased by 22.3% to HKD 1.24 billion, accounting for 59.7% of the overall gross profit.

On the other hand, the sales of fixed-price jewelry products increased by 67.9% to around HKD 2.28 billion, accounting for 35.7% of the overall sales amount. Nevertheless, due to a significant increase in the mix of wholesaling revenue from fixed-price jewelry products, which has lower gross margin than retailing, gross margin for fixed-price jewelry products, therefore, decreased by 0.5 percentage points to 36.8%. Its gross profit, however, increased by 65.6% to HKD 838 million, accounting for 40.3% of overall gross profit.

Now let's look at Slide 16 for performance in Hong Kong, Macau and overseas market. Retailing revenue from the Hong Kong, Macau and overseas markets increased by 8.9% to HKD 3.7 billion, accounting for 97% of these markets' total and 54.7% of group's total revenue. Its segment profit increased by 17.4% to HKD 491 million, accounting for 83.6% of these markets' total and 57% of group's total with segment profit margin of 13.1%.

Moreover, due to the addition of 5 overseas licensed shops during the period under review, wholesaling revenue increased by 89% to HKD 81 million, accounting for 2.1% of the Hong Kong, Macau and overseas markets' total revenue and 1.2% of the group's total. Its segment profit was HKD 62 million, accounting for 10.6% of these markets' total and 7.2% of the group's total. Its segment profit margin was 76.2%. As the segment profit of wholesaling business included the profit of intersegment sales of self-operated shops, if including intersegment sales in the denominator, its segment profit margin will be 5%.

On the other hand, Hong Kong licensing income increased by 3.8% to HKD 33 million, accounting for 0.9% of these markets' total and 0.5% of the group's total. Its segment profit increased by 5.9% to HKD 34 million, accounting for 5.8% of these markets' total and 4% of the group's total. Its segment profit margin was 103.2%.

Now let's look at Slide 17 for performance in Mainland market. The retailing revenue in Mainland increased by 23.6% to HKD 1.5 billion, accounting for 50.6% of Mainland markets total and 22.1% of the group's total. However, due to segment losses in 3DG's Mainland retailing business as a result of gold hedging losses, the group's retailing business in Mainland recorded a segment loss of HKD 14 million, accounting for negative 5.2% of Mainland market's total and negative 1.6% of the group's total. The segment profit margin was negative 0.9%. Actually, the gold hedging loss, half of the gold -- more than half of the gold hedging losses actually incurred in September 2025. So if the impact of gold hedging losses is excluded, the Mainland retailing business would have recorded a segment profit of HKD 182 million.

In fact, more than -- yes. So for the gold hedging losses because it happens in the later part of the first half period and because 100% of this -- the P&L impact needs to be recorded. But actually, the appreciation of value in the inventory, closing inventory cannot be booked because we have to -- we can only book the profit or the appreciation value of the inventory after it is sold. So most likely, all these kind of hedging losses would be offset by the actual sales in the second half of the financial year. So we are not that worried about the high hedging loss at the moment. So attributed to the expansion of product categories in the wholesale business, coupled with the robust sales performance of these new products, the group's revenue of the wholesale business rose significantly by 203.4% to around HKD 1.04 billion, accounting for 34.7% of the Mainland market's revenue and 15.1% of group's total. Its segment profit was HKD 46 million, accounting for 16.8% of Mainland market's total and 5.3% of the group's total. Its segment profit margin was 4.4%. As the segment profit of wholesale business included profit of intersegment sales to self-operated shops, if including intersegment sales in the denominator, its segment profit margin would be 3.8%.

Licensing income in the Mainland market increased by 17.7% to HKD 438 million, which accounted for 14.7% of Mainland market's revenue and 6.4% of the group's total. Its segment profit increased by 16.9% to HKD 242 million, accounting for 88. 4% of Mainland market's total and 28.1% of group's total and its segment profit margin was 55.3%.

Turning to Slide 19, which shows the breakdown of retailing revenue by region. The group continued to actively expand into overseas market and entered into the Vietnam market for the first time during the period under review. Revenue from the overseas market rose by 58.4% to HKD 482 million, accounting for 9% of the group's recurring revenue, a 3 percentage points higher mix than same period in the prior year.

Slide 20 shows the achievements of our e-commerce business in Mainland. Its revenue increased by 12.1% to HKD 843 million, accounting for 55.8% of retail revenue in Mainland and 16% of the gross retailing revenue with ASP increased by 33.3% to RMB 2,800.

Now let's turn to Slide 26. Even though TOE rose by 12.4% to HKD 1.3 billion, revenue growth outpaced this increase. As a result, TOE to revenue ratio improved by 2.2 percentage points to 19.1% as compared to the same period of last year. And then when you look at the table underneath the bar charts, actually, you can see that the rental expenses overall speaking, actually increased by 8% only in the first half of the period -- the financial year. Actually, we have sent 27 renewals out of 69 shops in first half of financial year 2026 with overall rental decrease of more than 25% in renewal.

Let's turn to Slide 28 for capital expenditure. We did not have any significant capital expenditure in first half of FY '26.

And then now let's look at the group's future plans and strategies. The group has set up its new 3-year corporate strategy starting from FY 2026 with overseas market expansion, market-oriented products and operational efficiency enhancement as its 3 main focuses so as to foster its future business growth.

On Slide 31, you can see that we have significant actually, we have -- we can see significant growth potential in overseas markets. We will therefore continue to allocate more resources to actively expand our global footprint and keep opening new shops overseas. The group entered the Vietnamese market for the first time in the first half of this financial year and currently group's footprint spans 12 countries and regions, with a goal to enter at least 3 additional countries and net add 50 new overseas shops within 3 years from the last -- from this financial year to the financial year ending March 2028. And in fact, although we talk about net addition of 50 overseas shops in 3 years' time, but actually, I hope highly likely that in the next financial year, we would have exceeded this 50 overseas shop addition already. But that means by 2 years' time, we should be able to achieve that target, 3-year target.

So in Slide 32, we -- you can see our network expansion plan and CapEx to FY 2026. We plan to have a net addition of around 20 shops in overseas markets this financial year. So far, we have already opened 8 new shops in the first half. For the Mainland market, we don't have a net addition plan, although we have that in the -- at the beginning of the financial year. But because of the actual situation, we expect there will be a net reduction of around 200 shops for the full year.

And the CapEx budget for 2026 is around $100 million, which will be used for shop openings and plant renovation as well as purchase new equipment for office. And let's look at Slide 37, which covers our second strategy focusing on market-oriented products. So in response to the trend of polarized consumption, we are expanding our focus to both premium and affordable luxury segments. We continue to optimize our product mix, launch concept stores and enhance product in-store merchandising. We'll keep sharpening our product differentiation for telling stronger brand stories and values, planning unique design with cutting-edge craftsmanship, offering personalized customization, launching IP collaboration projects and upholding top quality standards. With efficient product management, we tightly align sales and marketing, but we push hot sellers and grab every sales opportunity to maximize volume. At the same time, we'll stay agile on inventory, fine-tune the product mix and flexibly adjust to whatever the market demands.

Last but not least, Slide 38 shows our third strategy, operational efficiency enhancement. We will boost productivity by streamlining supply chain management, rolling out full automation, big data analytics and AI applications and strengthening product further collaboration with agile project management. We'll also maximize employee productivity by building culture of continuous improvement and innovation, upgrading our training programs and sharpening our performance management system.

Now let's shift to the group's branding and promotion. We have integrated strategies to attract target customers and to foster high customer loyalty. This slide is showing that we -- in order to meet increasingly diverse customer needs, we continue to deepen our multi-brand strategy by building a clearly differentiated brand portfolio that precisely targets different segments. We fully leverage each brand's unique strengths to drive synergies and stronger growth.

On Slide 41, we have invited famous actor Cheng Yi as the global brand ambassador to rejuvenate the brand innovation and tap into his massive worldwide fan base.

On Slide 42, you can see we have our signature collection DiaBling Shimmering Gold feature CNC color radiating finish, 360-degree filigree and precision laser cutting to deliver a stunning multifaceted sparkle on gold. Since launch, it has been extremely well received with total sales exceeding 230,000 pieces.

On the next slide is another signature collection Hulu, which symbolizes fortune and prosperity. We launched a series of promotional campaign with slogan get Hulu at Lukfook truly resonate with consumers and take roots in their hearts.

On Slide 44, Taiwan Fortune Collection another signature line using explicit antique gold craft, mother of pearl inlay and gilt coloring brings traditional culture to life with timeless heritage style gold pieces. We held road shows of Charm of Song Dynasty in Beijing and Dialin in May 2025.

On the next slide, Love is Beauty, a natural diamond collection that has been launched for over 14 years. It has become deeply ingrained in consumers' thoughts. On Slide 46, we further strengthened our leadership in the China-chic category through 3 IP collaborations with Tang Palace Cultural Creation. One of the films Night Banquet in Tang Palace, a top 10 national IP of 2021, was launched in September 2025 with over 140 new products. The other 2 collaborations will roll out in 2026 phase.

Next slide, following the hugely successful 2020 collaboration with the phenomenal film, Ne Zha, we launched a new series titled global Ne Zha 2. On the other hand, we collaborated with San-X for over 10 years to create numerous jewelry products of the Rilakkuma. On Slide 48, for the 24th year, Lukfook Jewelry served as the official sponsor of the crown and jewelry for the Miss Hong Kong Pageant. Lukfook also introduced the Love Yourself collection and limited edition 18K gold diamond crown to strengthen its brand image connection with beauty. We also co-launched new products with X+Q Art founded by renowned Chinese sculptor Qu Guangci.

On the next slide, to celebrate anniversary, we launched a brand-new Fun Net collection of gold jewelry and kickstarted a series of promotions. Slide 50 shows some VIP figures. Our membership base increased 20% to reach over 9 million in first half of financial year 2026, with members contributing 78% of the total retail sales. Member spending in the first half surged 41%.

Slide 50 (sic) [ Slide 51 ] highlights the results of our VIP Thankful Month. We rolled out a series of online and offline incentives that successfully attracted new customers, boosted engagement and drove strong in-store sales. Member contribution to group's retail sales during VIP Thankful Month rose 9 percentage points year-on-year. Over 1 million people engaged with our WeChat Mini program. 126,000 customers checked in at our stores.

On Slide 52, we invited celebrities for short- to long-term marketing campaigns to raise brand awareness and recognition among our customers of different brands and product collections. Slide 53, we organized promotional activities with various reputable partners, including King Pro League, Blue Girl, China Everbright Bank and Starbucks to expand our brand exposure to target customers.

Effective sustainability governance is a crucial factor in driving long-term success of the group. Therefore, we have -- we are committed to integrating ESG principles into our corporate planning and operational decision-making processes. We are honored to have received 12 awards in the first half of financial year 2026. Gold prices hit new highs again starting in September 2025. Although sales were impacted during the first week of September, they began to gradually recover from the second week onwards, indicating that consumers have gradually adapted to higher gold prices. From 1st of October to the first 3 weeks of November 2025, the group continued to report satisfactory sales growth across all markets. Simple sales in both the Hong Kong, Macau and overseas market and the Mainland market recorded double-digit growth. The Mainland market exhibited significant improvement compared to the second quarter of the current financial year, while performance in Hong Kong, Macau and overseas market remained broadly in line with that of the second quarter.

Following the implementation of new value-added tax policies for gold in Mainland, the gold raw material procurement costs have increased, which in turn drove up the cost of gold products. Fortunately, the aforesaid factors did not materially dampen consumer demand for gold products in Mainland. During the period from to 1st to 21st November 2025, overall same-store sales growth in the Mainland markets, covering both self-operated shops and licensed shops, as well as in the Hong Kong, Macau and overseas market continue to achieve double-digit growth. This concludes my presentation. Thank you.

Thank you, Kathy. Now we can move into the Q&A session. Ray, please open the floor for the questions.

[Operator Instructions] Our first question is from Mavis Hui from DBS.

Can I just check on a few questions. First, I actually want to check a little bit further in terms of our double-digit growth in October and November 21st. So is it possible to compare a bit in terms of our November sales momentum versus October in terms of the strength of the double-digit growth?

And my question -- on the second question is that what about our sales momentum by product for November so far, talking about fixed-price gold products, weighted gold products and gem sets overall? And my third question is that given the strong set of interim results, could we check on our latest same-store sales growth and margin guidance for the full year of FY '26?

Maybe I answer the margin queries first. Actually, especially in the Mainland China because of that new VAT policy, actually, we have to increase our selling price quite soon after the new policy became effective. That's why -- actually, for those products, actually, it's before that policy was released. So that means that the cost will be a bit lower because no that additional VAT amount inside. Therefore, in the first few months, I guess first few months after this new policy, actually, we should be able to enjoy an even higher gross margin than before because of that -- because of the low cost. So that's why for the gross margin, like in October and November, we can see that it's much higher, increased in terms of percentage points than the months before in the first half. So that means that overall speaking, it's likely that -- I'll talk about the retail sales only. It's likely that we maybe enjoy an even higher gross margin in the second half than the first half. So this is the first answer to your queries.

And then when we talk about October to November, actually, when we talk about the Mainland market, the performance was really good. And actually, from 1st of October to November, overall speaking, when we talk about a combined same-store sales figure for both operated and -- self-operated and licensed shop is actually exceeding 40%. And then for -- but for self-operated shops, it would be around mid-teens and for licensed shops more than 40%. So we mentioned quite a number of times in different investor meetings that the reason for lower performance for the self-operated shops was mainly because we are more conscious on the margin control. That's why we have less promotions done in our self-operated shops than the licensed shops. So -- and then actually, we've got -- when we talk about the product by product situation, actually, we can see that we have fix-priced jewelery products growing faster than the gold sales by weight type of product, mainly because we've got a very good -- we still have very good increase in the fixed-price gold products.

And then you're talking about November itself from 1st of November to 21, actually, there will be some seasonal effect inside too because October we've got like the National Day holidays. So basically, in November, with this new launch, actually, we can see that we have a bit lower performance than the October figures, but still exceeding 30% overall speaking for the Mainland market. And then when we look at the performance, actually, we have -- interestingly, actually, we have gold sales by weight increasing faster than the sales by the sales of fixed-price jewelry products in terms of same-store sales. So yes, that's the situation for the Mainland market.

Okay. Can I just follow up because I hope to seek your guidance on like same-store sales growth for the second half of this financial year? And also just to follow up on the sales performance for November, have we been seeing more purchases in Hong Kong, Macau, given the latest policy change for the VAT redemption in China?

Now interestingly, actually, at the beginning, we expect to see a better performance in Hong Kong because of that change in VAT policy. But in fact, it's not that case. Actually, we can see very good performance in Macau, but not in Hong Kong, very strange. So -- but still, we can see that Hong Kong, we have like -- when we look at the November figures in -- when we look at -- actually, mainly the Macau market that's having a very good performance and exceeding 30% same-store sales growth, but then -- I mean, in November. But then for Hong Kong, it's only a single digit. While in overseas, we have double digit as well. So Hong Kong, surprisingly is not as expected, performing better than the other markets. It's actually the other markets are performing better.

Right. I see. So overall speaking, are we changing our guidance on the same-store sales growth for second half?

Now actually, for same-store sales growth, we have a higher base in the second half. And originally, we expect the second half may be having a lower growth than the first half. I mean, in fact, when we looked at the October and November figures, I mean, up to now, you can see quite a strong growth actually in the latest month. So basically, I guess maybe we should expect -- because actually, overall speaking, we have a double-digit growth -- same-store sales growth in quarter 2 already. So we should -- I guess we should expect the double-digit growth in the -- to continue in the second half of the year.

Congratulations for very strong results.

Thank you.

Our next question is from Tiffany Feng from Citi.

I just have a follow-up question on the GP margin guidance. If the gold price maintain at the current level and you still have a lower cost inventory. But when the high-cost inventory coming in, what do you think of the GP margin for -- maybe for next year?

Well, if the gold price keep -- become very stable, no change. Of course, we would go back to standard margin. The standard margin should be something -- for gold should be something like 23%, something like that.

23%. That's overall for...

Standard margin. No, no, for gold only, gold selling by weight only. But then many experts are still expecting gold price to go up in the coming year.

Yes. Okay. Sorry. Please, go ahead.

No. I just want to remind you that we have a record high gross margin in this first half already. So maybe -- I guess maybe -- with the latest development, maybe we will still have a record high margin in gross margin in the second half.

Yes, yes, yes. I just want to double confirm the higher gross margin in second half is because of the price increase after the VAT policy change, right?

Yes, yes.

Okay. Okay. And do you have an updated guidance for the gold loan hedging loss for the second half?

No. Actually, in this first half, we don't really put too much focus on the hedging loss because actually -- because our revenue and profit are rising, so that means -- and the hedging loss is actually not that impacting our overall performance so severely as like last year. So basically, even though we talk about the -- if gold price keeps on rising, we would have expanded hedging loss, but then our sales would benefit from that with higher margin. And then we've only -- overall speaking, we've hedged only about 20%, 25%. So that means 75% without hedging. So for that 75%, we would enjoy, I mean, additional profits from the rising gold price.

Okay. So your assumption for the second half gold price is $4,100, 10% higher than the end of September. Is that correct for your GP margin guidance?

What do you mean? What's that 10% increase? What do you mean?

I mean do you have an assumption for the gold price in the second half to derive your GP margin guidance?

We don't normally forecast the gold price. The gold price fluctuation is very hard to predict.

Yes, yes. So basically, you assume the gold price maintain at the current level, right?

We -- when we talk about forecast or talk about budget, we always assume the gold price to be stable.

Okay. Okay. Understood. And second question is regarding the wholesale revenue, the very strong performance in the first half. Can you give us some more color to -- for the driver behind, and what is the outlook for second half and going forward?

Yes. In fact, when you look at the wholesaling business in the past, we've mostly diamond sales, 18-carat gold diamond sales. And within the COVID period start to drop -- the demand dropped quite severely and it's kind of a double-digit drop every year since COVID period. And then that's why in the past years, you can see -- few years' time, we can see that the wholesaling revenue in Mainland was -- continued to drop. So in this year, we have changed our policy or strategy in terms of wholesaling business. We try to shift those kind of exclusive type of products or promotional types of products into the wholesaling business so that the licensed shops are not buying these type of products directly from the suppliers, they are buying from us. So that's why you can see such a huge increase in the wholesaling revenue. So we will keep on doing that in the future.

Okay. Okay. Understood. And finally, I just want to follow up the November same-store sales growth. And why do you think the purchase -- the demand behavior is so resilient after the price increase? Is there any observation you have on the ground?

Well, in fact, I think this new change actually hit those very small retailers, especially those relying on price cutting. So basically -- I mean, price cutting on those gold selling by weight. And I think this change in policy actually drove all these types of retailers quite seriously. And then it seems that people are going back to us to buy those gold products by -- selling by weight. I guess it's because of that. So that's why we can see very strong performance of gold sales by weight after this change in policy, VAT policy.

Okay. You gained a lot of share from those smaller players?

Yes.

Okay. So do you think this is sustainable in the coming months? Or it's just a one-off shift?

Up to now, we can see we can still see very strong performance. So I think it's fine.

[Operator Instructions] At the moment we do have questions from the webcast. The next question is from Pu Hui from Huatai Securities. And the question is, could the management please provide an update on the performance guidance for the second half of FY 2026 and the full fiscal year? Additionally, how long do you anticipate the current trend of store closures in Mainland China will continue?

In fact, we have mentioned in the presentation that we expect for the full year, we would have a net reduction of around 200 shops altogether for the full year. So basically, it will be mainly licensed shops in Mainland. And you can see that we have a net reduction of 174 already in the first half. So that means that in the second half, it will be much less than the first half. So basically -- and then in our latest planning, actually, we expect to see or we target to see a much higher -- I mean, a net additional gain in the next financial year. That's what we are targeting at the moment. Of course, for this future year target, we will be updated in our final result announcement in June next year, 2026. So basically, at this moment, we are still optimistic about the future growth in terms of network expansion, I mean, in the next financial year. Yes. And then for the second half, you've talked for store...

Regarding guidance for the second half.

Yes. So in terms of shop closure, I think it will be much less than -- in the second half is much less than the first half, yes. Okay. Is that okay?

No we will get back to the audio questions. The next question is from Mavis Hui from DBS.

I just have a few more questions here. So it seems that the gold price ramped up even faster in October and November as compared to the half. So if that's the case and if there are market estimates that going forward into 2026 calendar year, the price could be stronger. Would there be any measures that we could adopt to mitigate our hedging loss, such as playing down a bit our gold hedging ratio? So that's my first question.

And then second one is then among our fixed-price gold product offerings, which product series were our top 1 to 2 performers? And by how much have they contributed to our interim results? And then my third question is that on our Slide 31, we mentioned a target to enter 3 more new markets during the latest 3-year plan. So do we have any idea right now that in terms of where these 3 regions will be? And by the way, with the plan for net addition of 50 stores in overseas markets for 3 years, which regions could be focusing more on our store expansion?

Okay. Actually, for gold price increase with -- actually, our hedging ratio is already the lowest amongst our peers. And we haven't changed that ratio for many, many years because we believe that gold price would go up in the long, long term. So long term is not only talking about a decade, it's decades. So basically, this is a policy, and we won't change our policy too frequently because it's something long term. So unless there will be some fundamental changes happening, but we don't see that to happen. So basically, we don't foresee any change in our hedging ratio at the moment.

And for the fixed-price jewelry products, I guess the best sellers would be those fixed-price gold products with diamonds. And then second one would be those without diamonds, especially the DiaBling collection. And then for the new markets, actually, we have some new markets in mind already, some in Europe and some in Southeast Asian areas. So basically, we have that in mind and in plan already. So I guess in next year, it would -- because we have entered one new market already, that's Vietnam. And then the next -- there will be at least 2 more countries entering in next year. So we will announce that once everything is confirmed.

And then for the net additions, I guess for some operating shops, we would add more like in U.S., Australia, Malaysia. actually we got some operating shops in 4 overseas countries only. That's U.S., Canada, Australia and Malaysia. So we would continue to add more self-operating shops in these 4 countries. But for -- maybe in some European countries as well. And then for the -- but for the net -- for the additions, mostly, they will be licensed shops. So licensed shops, we would mostly open in South Asian countries.

Right. I see. So how is the margin compared for overseas markets overall versus our group level? Is it possible to...

They have very -- they have similar margin level like Hong Kong, Macau market. And actually, they -- sometimes they perform even better than Hong Kong, Macau market in terms of profit margin. Especially they have -- actually, they have a high gross margin than all the other -- I mean, than those margins in Hong Kong, Macau and Mainland.

[Operator Instructions]

Thank you, Ray, and thank you, Kathy. That's all the questions we have today. And so we come to the end of our conference. Thank you once again for joining us. If you need an audio replay or any assistance, please contact us at [email protected]. Wishing you all a wonderful weekend ahead. Good-bye.

Goodbye.

This now concludes our presentation. Thank you all for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to Luk Fook Fiscal Year 2024/2025 Annual Results Presentation. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Joanne Ho. Please go ahead, Joanne.

Thank you, Ray. Good morning, everyone. I'm Joanne from Luk Fook IR team. Thank you for joining us today for our financial year 2025 annual results. It's truly a pleasure to connect with you all.

I need to start with an apology. We have run into a technical issue with our webcast platform, which is the platform to the event. I'm very sorry for that, and thank you for your patience and understanding.

Today, I'm joined by Dr. Kathy Chan, Executive Director and CFO of the group, who will walk us through the annual performance. And after her presentation, we will open the floor for a Q&A session. This call will be in English, and you can find the presentation materials on our website. So I would like to pass the time to Kathy for her presentation.

Okay. Thank you, Joanne, and good morning, ladies and gentlemen. Thank you for joining Luk Fook's Financial Year 2024/'25 Earnings Results Presentation. I would like to start with looking at our financial highlights, followed by financial review and then our future plans and strategies. The details are recorded in the corporate presentation, which has been uploaded to our website this morning.

Now let's look at Slide 4 about the financial highlights first. Despite sustained geopolitical tensions and trade uncertainties, [indiscernible] the macroeconomic outlook and driving gold prices upward, the group's performance across all regions showed improvement in the second half of financial year 2025. Revenue reached HKD 13.3 billion, a 12.9% decrease compared to the same period last year, primarily due to a decline in sales of gold products caused by record high gold prices during the year.

The surge in gold prices resulted in a widening gold hedging losses of HKD 493 million during the year, together with last year's one-off gain of HKD 213 million from the acquisition of 3DG Group for comparisons -- decreased by 33.3% to HKD 1.4 billion, and the operating profit margin declined to 10.6%.

Consequently, the group's profit for the year decreased by 39.3% to HKD 1 billion. When these 2 factors are excluded, the decline would reduce to 6.3%. The basic earnings per share decreased by 37.9% to HKD 1.87. Proposed final dividend of [ HKD 0.55 ] per share with annual dividend of HKD 1.1 per share and dividend payout ratio of 59%. There was a net [ increase ] of 296 shops globally, including a net decrease of 312 Luk Fook shops, a net increase of 21 3DG jewelry shops and a net decrease of 5 sub-brands or product line shops.

Now next slide shows the movement in our operating profits. Benefited from the rising gold prices, the group's overall gross margin rose by 5.9 percentage points to 33.1%, while gross profit increased by 5.8% to [ HKD 4.42 billion ]. Total operating expenses increased by 13.7% to around HKD 2.6 billion. Coupled with the decline in revenue, the ratio of TOE to revenue increased by 4.6 percentage points, reaching 19.6%.

As mentioned before, the surge in gold prices resulted in the widening gold hedging losses of HKD 493 million during the year. In addition, the high base effect caused by the last year's one-off gain of HKD 213 million from the acquisition of 3DG Group, our operating profit for the year has decreased by 33.3% to HKD 1.4 billion.

Now let's go into the details of our financial performance. Let's go to Slide 9 now. Our inventory balance grew to around HKD 10.7 billion as at end of March 2025, while revenue dropped. Therefore, both the average and closing inventory turnover days increased by over 110 days year-on-year, reaching a total of over 420 days by the end of March 2025. That said, we saw a gradual improvement in inventory turnover days in the second half of the financial year as compared to the first, which points to positive momentum moving forward. Our ROE decreased by 5.4 percentage points to 8.3%.

Let's go to Slide 10 now. At the end of March 2025, the group's NAV per share was HKD 22.38, which is 2.2% higher than the same period of last year.

Now let's look at Slide 12 for the performance analysis by market. Revenue from Hong Kong, Macau and overseas market decreased by 19.6% to HKD 8.07 billion during the year under review. It accounted for 60.5% of the group's revenue. The segment profit dropped by 7.7% to HKD 1.1 billion, which accounted for 65.3% of the group's total. When excluding gold hedging losses incurred, the segment profit would increase by 7.8% to HKD 1.3 billion, and the adjusted segment profit margin will increase by 4.2 percentage points to 16.5%.

The retailing business in the Mainland market showed gradual improvement in the second half of the financial year. As a result, revenue from Mainland market decreased by 0.2% only to HKD 5.3 billion, accounting for 59.5% of group's total revenue. The segment profit decreased by [ 40.7% ] to HKD 577 million, accounting for 34.7% of the group's total.

Due to the reduced contribution of licensing business of a higher segment profit margin, segment profit margin was [ 11% ]. When excluding the gold hedging losses attributed to the Mainland market, the segment profit would be HKD 829 million. The adjusted segment profit margin decreased by 3.3 percentage points to 15.7%.

Actually, when we look at our second half performance in all regions, it's actually much better than first half. And in our corporate presentation, you can find at the end part, at the appendix part, you can see that we have shown our first half and second half analysis there. So if you have -- if you're interested in looking into more detail about the difference between the first half and second half performance, you can go to the end part of our corporate presentation later on.

Now let's look at Slide 13, which shows our revenue and segment profit by business. Retailing business was the main source of revenue of the group. The group's retailing revenue decreased by 13.5% to HKD 11 billion, accounting for 82.7% of the group's total revenue. The segment profit decreased by 17.7% to HKD 1 billion, accounting for 61.6% of the total and the segment profit margin was 9.3%. When excluding the gold hedging losses attributed to the retailing business, segment profit would increase by 8.4% to HKD 1.4 billion. The adjusted segment profit margin will increase by 2.6 percentage points to 12.9%.

Due to the continued sluggish demand for diamond products in Mainland and a decrease in the number of licensed shops, the group's wholesaling revenue declined by 8.8% to HKD 1.4 billion, accounting for 10.5% of the group's total revenue, because of the decrease in revenue and a high sales mix of wholesaling with lower gross margin, reduced government subsidies and expenses incurred from staff optimization, the segment profit decreased to HKD 14 million, accounting for 0.8% of the total and its segment profit margin was 1%.

As the segment profit of wholesaling business included profits from inter-segment sales to self-operated shops, if including segment sales -- intersegment sales in the denominator, the segment profit margin would be 0.4%. When excluding the gold hedging losses attributed to the wholesaling business, this segment profit would decrease by 40.7% to HKD 115 million and the wholesaling segment profit margin would decrease by 5.5 percentage points to 8.2%.

Licensing income decreased by 12.6% to HKD 904 million, accounting for 6.8% of the group's total revenue. The segment profit margin was 69.2%, while segment profit decreased by 13.9% to HKD 626 million, accounting for 37.6% of the total.

Let's look at the product analysis on Slide 14 now. During the year under review, the average international gold price in U.S. dollar per ounce increased nearly 30% year-on-year. The high gold price affected consumer sentiment. Consequently, sales of gold and platinum products by weight decreased by 15% to HKD 8.8 billion, accounting for [ 70.9% ] of the overall sales amount. However, its gross margin increased by 7.1 percentage points to 26.4% because of the rising gold prices. Gross profit of gold and platinum products, therefore, increased by [ 16.2% ] to HKD 2.3 billion, accounting for 62% of the overall gross profit. On the other hand, the decline in sales of fixed-price jewelry products narrowed significantly in the second half of financial year 2025 as compared to the first half. Therefore, for the full year, sales of fixed-price jewelry products only dropped by 7.6% to HKD 3.6 billion, accounting for 29.1% of overall sales amount. Nevertheless, because of the increased mix of retailing revenue, which has high gross margin than wholesaling, gross margin, fixed price jewelry products increased by 3.3 percentage points to 39.4%. Its gross profit remained flat at HKD 1.4 billion, accounting for 28% of the overall gross profit.

Now let's look at Slide 16 for outperformance in Hong Kong, Macau and overseas markets. Retailing revenue from the Hong Kong, Macau and overseas market decreased by 20.4% to HKD 7.9 billion, accounting for [ 97.6% ] of these markets totaled and 59% of the group's total revenue. [indiscernible] segment profit decreased by 7.9% to HKD 969 million, accounting for 89% [ fee ] markets total and 58.2% of the group's total, with a segment profit margin of 12.3%.

When excluding the gold hedging losses attributed to the Hong Kong, Macau and overseas market, segment profit would increase by 4.6% to HKD 1.1 billion and adjusted segment profit margin would increase by 3.5 percentage to 14.5%.

In addition, due to the addition of 4 overseas licensed shops during the year, the wholesaling revenue increased by 35.6%, HKD 147 million, accounting for 1.8% of the Hong Kong, Macau and overseas markets total revenue and 1.1% of the group total.

[ The segment ] profit was HKD 17 million, accounting for 6.4% of this market's total and 4.2% of the group's total. Its segment profit margin was 47%. As the selling profit of the Wholesaling business included a profit of intersegment sales to sell operated shops is including [indiscernible] in the denominator, its segment profit margin will be 3.3%. When excluding gold hedging losses borne by the wholesaling business, this segment profit would increase by 44% to HKD 139 million and the adjusted wholesaling business profit margin will increase by [ 5.4 ] percentage points to 94%.

Apart from that, Hong Kong, Macau and overseas markets licensing income increased by 9% to HKD 50 million because of the increase in number of licensed shops overseas. And this account for [ 0.6% ] of these markets' total and 0.4% of the group's total. The segment profit increased by 8.6%, HKD 15 million, accounting for 4.6% of these markets total and 3% of the group's total. The segment profit margin was [ 1.6% ].

Now let's look at Slide 17 for performance in the mainland market. The retailing revenue in Mainland increased by 10.4% to HKD 3.1 billion, accounting for 59.9% of Mainland markets total and 23.7% of group's total. Segment profit was HKD 57 million, accounting for 9.9% of Mainland markets total and 3.4% of the group's total. The segment profit margin was 1.8%. When excluding the gold hedging losses attributed to the retailing business here, the segment profit would increase by 27.8% to HKD 277 million, and adjusted segment profit margin will increase by 1.2 percentage points to 8.8%. Although demand for diamond products in the Mainland market remains sluggish, the launch of new collections of fixed-price gold products during the year has significantly narrowed decline in wholesaling revenue to negative 12.2% to HKD 1.2 billion and accounted for 23.9% of Mainland markets revenue and 9.4% of the group's total.

Because of the decrease in revenue and a high [ submit ] of growth wholesaling with lower gross margin, a decrease in the government -- and the decrease in the government subsidies and expenses incurred from workforce optimization, the segment turned from profit to loss of HKD 55 million, accounting for negative 0.5% of Mainland market's total and negative 3.3% of the group's total. The segment profit margin reduced to negative 4.4%.

As the selling profit of Wholesaling business included the profits from intersegment sales to self-operated shops, if including intersegment sales in the denominator, its segment profit margin would be negative 4% in fact. When excluding gold hedging losses attributed to the Wholesaling business, this segment growth would decrease to HKD 23 million, and the adjusted Wholesaling segment profit margin would decrease by 9.9 percentage points to negative 1.9%.

And I want to emphasize that the reason why we want to look at the -- excluding gold hedging losses to [indiscernible], it's mainly because, actually, the gold hedging losses would need to be recorded fully in our account by end of the year. And you know that actually by March and -- or end after -- by end part of March to [indiscernible] actually the gold price increased a lot. And that's one of the reasons why our gold hedging losses become so high.

And then for the inventory, actually, we can't record the rising gold prices because of the prudent concept. So that's quite an unequal treatment -- accounting treatment in terms of gold price rises in inventory and the hedging positions. So that's why if we look at the position, excluding the hedging losses, it would be more kind of a clearer picture of the real performance.

So our licensing income in the Mainland market decreased by 13.6% to HKD 854 million, which accounted for 16.2% of Mainland market's revenue and 6.4% of the group's total. The segment profit decreased by 14.5% to HKD 575 million, accounting for 99.6% of Mainland market's total and 34.5% of the group's total. Its segment profit margin was 67.4%.

Now let's look at Slide 20 about our e-commerce business in Mainland. Its revenue remained flat at HKD 1.84 billion, accounting for 58% of the retailing revenue in Mainland and 16.7% of the group's retailing revenue with ASP increase by 22.2% to CNY 2,200.

Now let's move on to next slide and take a look at the performance of our self-operated shops. Given the high base effect of same-store sales, the group was negative 25%. The same-store sales of Hong Kong and Macau market was negative 12% and negative 28% and negative 12% for the Mainland market. The group simple sales for gold and platinum products was negative 28% and negative 14% for fixed-price jewelry products.

Now let's go to Slide 24 for average ticket size. The average ticket size in Hong Kong, Macau and Mainland all increased by 8% to 16%. The average selling price of overall fixed-price jewelry products showed improvement across Hong Kong, Macau and Mainland. Notably, both Macau and Mainland markets saw a 20% increase.

And then let's look at Slide 26. Our total operating expenses increased by 13.7% to HKD 2.6 billion, representing 19.6% of revenue. The [indiscernible] to revenue ratio increased by 4.6 percentage points as compared to same period last year, mainly attributable to the decrease in revenue. We have [ 18 ] renewals out of [ 70 ] shops in FY '25 with a flat overall -- a small percentage of 4.6% overall renewal increment -- sorry, a flat overall renewal increment and the total operating -- total rental expense [ transaction ] is 4.6% above last year's level. So it's a very minor increase overall speaking.

And then we have 28 shops subject to renewal in FY 2026 and is around 40% of the total. The increment rate is expected to be lower than financial year 2025.

Now let's look at Slide 28 for the CapEx. We do not have any significant CapEx in FY 2025, and we don't expect any significant one in FY 2026 as well.

And now let's look at the group's future plans and strategies. The group has set up its new 3-year corporate strategy starting from financial year to with overseas market expansion, market-oriented products and operational efficiency enhancement as its 3 main focuses so as to foster its future business growth.

On Slide 31, you can see that we have -- as we saw a significant growth potential in the overseas market, we will continue to allocate more resources to expand its footprint across the world. Currently, the group's footprint spans 11 countries and regions with the goal to enter 3 more countries and establish 15 new overseas shops within the next 3 years.

In addition, the group is committed to developing its e-commerce business and strengthening cooperation with various e-commerce platforms overseas. At the same time, it will also optimize its own e-commerce platforms earnings to sustain the growth in e-commerce revenue. In light of the enormous spending potential of young consumers and online sales platforms, the group will continue its endeavor to promote the sales of affordable luxury jewelry products to expand its global footprint in the young consumer markets.

And let's look at Slide 32. It shows our network expansion plan and CapEx budget for FY 2026. We remain cautiously optimistic about its medium- to long-term business prospects in Mainland, and we'll continue to expand in Mainland market in the future. Therefore, the group targets to net at 50 shops for the mainland market in the financial year 2026. And apart from that, the group is optimistic about the immense growth potential in the overseas market, as mentioned before, and therefore, we will allocate more resources for expansion and plans to have a net addition of approximately 20 shops in the overseas market in the financial year 2026.

Furthermore, the group also aims in net addition [indiscernible] shops in the Macau market. The CapEx budget for FY 2026 is expected to be around 100 million, mainly for shop [ rendition ].

Now let's look at Slide 37, is talking about segment focus. Strategy focus is on the market-oriented products. In response to the trend of polarized consumption, we're extending our focus to both premium and affordable luxury segments through in-depth analysis of consumer needs, the group continues to optimize its product mix, launch concept stores and enhance product indoor -- in-store merchandising. Furthermore, the group leverages its market data to drive product innovation.

The group continues to promote its product differentiation strategy by delivering brands for recent values, combining its unique design of craftmanship innovation, providing personalized customization, services, launching, IP collaboration projects and ensuring quality assurance and enhance its market competitiveness. Additionally, efficient product management enables the group to effectively coordinate sales and marketing and strengthen supply of selling products, thereby fully capitalizing on sales opportunities to boost sales volume.

On the other hand, the group enhances inventory efficiency by precisely managing product structure and factory adjusting the product portfolio in response to market demands based on data-driven product management strategies.

Last but not least, Slide 38 shows our strategy, operational efficiency enhancement. The group will promote its productivity by optimizing the supply chain management, implementing full automation, big data management and data analytics as well as the application of artificial intelligence technology. At the same time, through [ developmental ] proliferation and agile product management will further help to enhance collaborative efficiency among teams, ensuring companies to remain competitive in the rapidly changing market.

The group will also strive to maximize employees' productivity by cultivating culture of continuous improvement and innovation, nurturing strategic thinking and proactive attitudes, optimizing its training program -- programs and refining its performance management system.

Now let's shift to the group's branding and promotions. We have integrated strategies to attract target customers and aim to force higher -- high consumer or customer loyalties. On Slide 40, you can see that we have invited famous actor [indiscernible] as the global brand ambassador to rejuvenate the brand image, making it more appealing to the new generation.

Next slide, we can see that we transformed various product lines into independent stores and adopted multi-brand strategies to reach different target markets. We also introduced different shop images to rejuvenate the brand.

And Slide [ 40 ] show that Luk Fook Jewelry has collaborated with the Hong Kong beauty pageant with Hong Kong for the 23rd year as the official sponsor of the crown and launched its series of jewelry products.

Let's look at Slide 43. We raised the recognition of the traditional Chinese phone 1, Bao, of the brand name, which is distinct to Hong Kong brand via different promotion channels and materials. We also incorporated the Hong Kong bill to [indiscernible] nostalgic Hong Kong style deco into the store design in order to promote Hong Kong culture.

On Slide 44, as new Chinese style has gained popularity among the Generation Z in the recent years, we have planned expressive traditional Chinese elements with more than [indiscernible] to create collections, including the Tang Dynasty style, charm of [ Tzung ] Dynasty and gold branded of [indiscernible] coupled with road shows in the new Chinese ambience and the slogan of [ Get woo at Luk Fook ]. We have successfully seized the market opportunity arising from this track.

On the next slide, we invited 2 famous actors to be the ambassadors of the necessary campaign and started a series promotions with rich and overall exposure of 1 billion sales. We have successfully launched our new [indiscernible] collection through several key initiatives, [indiscernible].

On Slide 46, we hosted our first-ever jewelry show at [ Harbin Ice and Snow World ], drawing visitors from across the country. We also ran the I shine for [indiscernible], the campaign with our management and shop representatives showcasing the collection. As we team up with Trip.com for lucky draw that racked up 218 million total views.

On Slide 47, we invited renowned actress, Ms. [ Kelly Zhong ] to officiate the opening ceremony at the Luk Fook Jewelry Race Day where she, along with 6 [indiscernible] and finalists of Ms. Hong Kong [ 2024 ] showcased our new DiaBling” shimmering gold collection. The promotion across 4 top platforms generated over 400 million views.

On Slide 48, we launched a series of promotions to validate the year of the snake by collaborating with the red to launch the faction Gold campaign. We also invited young celebrity [indiscernible] as the campaign's spokesman to feature new products in creative ways.

On Slide 49, we invited a variety of celebrities for short- to long-term marketing campaigns to raise brand awareness and recognition among our customers of different brands and product segment.

On Slide 50 shows some of our VIP figures. Our membership base increased nearly 23% to reach over 4.9 million in FY 2025, with members contributing 55% of the retail -- to the retail sales. We consolidate all [ sub-brand ] memberships in to Luk Fook Jewelry membership program. Members need only a single [indiscernible] account to accumulate points, enjoy a wide range of exclusive [indiscernible] across all brands and the Luk Fook. We also held nearly 12,000 VIP workshops during the year.

Slide 51, we co-organized promotional activities with various reputable partners to expand our brand exposure to target customers.

And next slide, we coordinate to organize the 500 [indiscernible], the love song pop-up store with the platinum yield International and the academic exchange event with [indiscernible] university Mother of Pearl of [indiscernible], which is one of the intangible cultural heritage.

Effective sustainability governance and a crucial factor in driving long-term success of the group. Therefore, we are committed to integrating ESG principles into our corporate planning and operation decision-making process. We are honored to have received 40 awards in FY 2025.

The increase in Central Bank's [ go ] reserves and escalating worldwide geopolitical tensions has driven gold prices to rise continuously. Although this rise in gold prices may affect sales performance, an increase in profit margin will help mitigate the impact of the decline in sales. Sales of the gold products are expected to resume to the normal levels after the consumers adapt to the high gold prices. Furthermore, with the flourishing development of jewelry craftsmanship, the group will actively promote fixed-price gold products and fixed-price diamonds set gold products to replace diamond set 18-carat gold products.

With effective branding and product differentiation strategies, the overall same-store sales of the group from 1st April to 21st June 2025 has further improved. Simple sales in the Mainland market saw nearly 20% growth, while the Hong Kong and Macau market remains relatively flat. With the ongoing optimization of fixed-priced jewelry product mix and improving Mainland markets, the group's business performance may improve in the remaining months of FY 2026.

Given the overall support of the group, 3DG Group has demonstrated strong business growth and significant improvement on operation in 2025. If revenue amounting to HKD 712 million for the 9 months ended 31st March 2025, representing an increase of nearly 20% over the 12 months ended 31st March 2024. The reason why 9 months against 12 months is mainly because they changed the year-to-date from June to March. So they have 9 months only in the financial year 2025.

The gross profit margin increased 7 percentage point or 35%. Excluding the impact of gold hedging losses, it's retailing, licensing and e-commerce business and overall business in Mainland all recorded a turnaround to profits. Besides the simple sales of this Mainland market recorded a nearly 20% growth from 1st April to 21st June 2025 as well. It just believes that with all continuous optimization in various aspects, 3DG Group -- 3G Group will become an important driver for the group's growth. This concludes my presentation. Thank you.

Please open the Q&A session.

[Operator Instructions] Our first question comes from the line of Mavis Hui from DBS.

I've got 3 questions for you. It seems that we have seen very good recovery in the sales momentum for Mainland China during April to June this year. We elaborate more in terms of the main drivers, please, such as new products, new categories or maybe a low base, for example? And what could be the hurdles for Hong Kong, Macau to see a similar sales rebound, especially given actually Hong Kong, Macau has an even lower base for year-on-year improvement?

Now you've talked -- I think you have 2 questions only, right? Not 3, right?

Actually, I have more.

Okay. Okay. So let's talk about the Mainland market performance in the April to June this year. And in fact, actually, we have -- we've seen a very strong rebound of strong performance in the fixed price gold jewelry products, especially because we got a new collection released in -- I think around November 2024. And then its performance was very good and up to now is still selling very well.

And then actually, normally, when we launch something new, there -- the self-operating up will be more [indiscernible]. So normally several [indiscernible] do better first and then you will extend to the licensing -- licensed shops. So basically, because of a few months of launching or after months of launching of this new collection, we try to promote very actively to the licensed shops, so they try to buy more, too. So that's why we have a very good performance up to now for this new collection. And we've got the kind of -- the suppliers got a [ tie ] for the patent, right, for this one. And then they have given us the exclusive rights for the sale as well. It's kind of a unique product in the market at the moment.

And then besides that, we have a new ambassador, [indiscernible]. And I think he helped us a lot as well in terms of promoting the sales because he's got a lot of fans and it helped a lot in selling the products or promoting our products, especially when we have announced his -- when we announced his ambassadorships, actually, he has -- we have launched 5 products at the same time when we launched -- when we talk about this new -- announced this new spokesmanship. And that 5 products actually sold out in 17 minutes. It's a very, very impressive performance actually.

So all these -- of course, we've got other new collections as well like the new Chinese kind of [indiscernible] so those different products are selling quite well, too. That's why you've helped a lot in the performance of our fixed-price gold jewelry.

Apart from that, actually, we have started to put in some diamond in the pure gold too. That's why it -- and it looks very, very good and is quite well received by the market, too. So all these factors, I think it's mostly in the product side. We talk about kind of a market-oriented product focus. So I think we have done that quite successfully. And it's very helpful in improving our performance in the early parts of this financial year.

And for the Hong Kong, Macau market, because the profit -- the kind of [indiscernible] in condition here in these 2 markets, not to good, although we can see the rise in visitors, Mainland visits number, but actually, their per capita spending actually dropped quite a bit. And so that's why it's kind of struggling. But actually, we can see an improvement already. At least we start to see kind of a flattish position against the kind of drop in the first half. So basically, I think it's improving. So hopefully, we will see a kind of a rebound again in the coming months in Hong Kong, Macau market.

That's great. Actually, Kathy, that was my first question. And my second question is that on Slide 24, we were seeing a falling ASP for non-gold fixed-price products. While overall fixed-price jewelries are actually still sustaining supportive ASP trend. So could we have a better idea in terms of ASP trend of fixed price gold products? And would we expect such ASP be on an uptrend going forward? And besides what's the expected contribution from fixed price gold jewelries in terms of total revenue for this current financial year FY '26?

Now in fact, when we look at the fixed side gold products its contribution to the overall revenue of -- I mean, the retailing revenue within the fixed-price jewelry sector, actually increased from 33% to 54% in financial year 2025, increased a lot actually. So it's kind of a doubling of its mix, sales mix within their portfolio. So basically, that's why is a very strong performance.

And when you look at the kind of ASP drop in jewelry, it's mainly including the kind of diamond. I mean, in Slide 24, diamond, [indiscernible], then color stones and pearl products. So it's kind of a higher value type of product. So for that part, it's not that -- I mean, the kind of sales with this part is quite -- was quite sluggish. That's the reason why. It is kind of a trading down phenomenon there. That's why you can see that it's dropping in terms of ASP.

And for the fixed-price gold products, in fact, when you look at the kind of high ASP would be mainly -- part of the reason will be mainly because of the rise in gold price. So basically, you would have some relationship with the gold price fluctuation in terms of the variance -- I mean, the increase or decrease in ASP.

So basically, of course, we are now trying to offer more kind of higher weight -- I mean kind of a higher weight fixed-price gold products or kind of higher prices, fixed-priced gold products as well because that's -- there's kind of a polarization in terms of consumption in the market. So we're trying to offer more high-value products into the market as well as kind of affordable luxury products as well.

So not -- hopefully, maybe kind of an increase in ASP. And now actually, we have given them fondly KPI for selling the high-value items as well.

Right. And my last question is that can you give us overall guidance in terms of same-store sales growth by market and also like gross margin, EBIT margins? And besides, what's our plan for gold hedging policy because they were 20%. And as there is an upside in gold price probably as per market expectations, do we still keep this kind of level? Or would we minimize gold hedging ratio?

No, in fact, when we talk about the gold hedging ratio, we are quite a stable one, really. We don't adjust that too much. Normally in the past, we have 20% to 25%. And this year, we got something like 27% because of 3D gold. They -- we try to -- the higher hedging ratio for them in order to reduce their interest expenses because gold loan will be much cheaper than corporate -- other corporate loans. And that's why we have a bit of increase in our overall hedging ratio from around 20 -- 20 something, 25% -- below 25% to now kind of 27%.

So basically, I think we don't intend to change that too much because the gold price -- and actually, you know that there is a kind of a view from various experts that the gold price may drop sometimes later. So basically, I guess it made better for us to keep a stable hedging ratio because of -- because actually, you don't hedge 50%. But we have a view that in long term gold price would rise, I mean long, long term. So that's why our hedging ratio will be much lower than the other competitors normally.

And then when we look -- when we talk about the targets, same-store sales goods and we don't have a very specific one, but we are all -- I guess, in the coming -- in this financial year 2026, we should expect something like a double-digit growth for -- in terms of same-store sales across all regions.

And what about profitability -- what about gross margin [indiscernible] in terms of [indiscernible]. Some of the investors also have the questions. Okay. Maybe [indiscernible]

Our next question comes from the line of Tiffany.

I just want to follow up, first of all, on the fixed gold, more details about this product line. And do you have a sales target for FY '26? And what is ASP and margin for this product? And also for the sales of the fixed-price gold at your franchising stores, is it in wholesale revenue or along -- yes, this is my question.

And for -- my second question is for the same-store sales growth for your franchising stores. Is it similar to your self-operated stores? And what is the outlook for the full year.

Now you got fixed by gold products. Actually, we should expect that the sales mix of that to improve further is now already contributing more than half of the fixed-priced jewelry products. And I think we expect that to increase further, but that is to quantify that. But this when comparing against prior years from 33% to 54% already, so maybe there may be kind of a -- try to have a double digit, maybe 10 percentage points more. It's not too sure, but maybe it would happen like that.

And the ASP of that will be -- because it's now getting kind of high mix there, so you may see that the ASP should be something similar to what we have in the slide -- in image slide -- one moment please. In Slide 24, so it's around like it will be something like quite similar to the overall fixed price jewelry area because it has kind of a high mix there. So if you look at Slide 24, is something like 6,500 in Macau and then Hong Kong 5,100 and Mainland, 2,500. So it means the average should be around that kind of level. And then the gross margin of fixed-price gold will be quite similar to fixed-price jewelry overall speaking, just like diamond. So basically, it's go back to the slide 24 -- 14. So for the fixed-price jewelry, gross margins were around 39% for deleverage for the group as a whole.

And for the -- for fixed price jewelry sales, in the licensed shops, it's because the shops are not our shops, so we can't count it as a retailing revenue. We only count the wholesaling revenue and the licensing income for those fixed price gold products they purchase. So -- but I can get to your last question about the self-operating shops and licensed shops. Which aspect are you talking about?

I'm just asking whether the franchising stores or same-store sales growth performance is similar to your self-operated stores or there's a difference. What is the...

Actually, quite similar. On Slide 22, you can see that we've got their comparison, licensed shops. In FY 2025, the overall same store sales was negative 10%, while self-operated shops, negative 12% in Mainland. So they have a similar performance, but licensed shops would be normally a little bit better than self-operated shops because they normally occupy very good locations.

What about quarter-to-date? Means April to June still better than the self-operated stores?

Yes, yes, licensed shop performed better.

So It's over 20% growth. And double confirm the fixed price gold sales at your franchising stores, so you booked both wholesale revenue and licensing revenue.

Yes, because resell -- if the products are sold by us to them directly with booked wholesaling revenue, if they purchase from our authorized suppliers, you won't [ see the ] wholesaling revenue. And then for the licensing income, no matter they buy from us or buy from other suppliers, we would [ trust them by ] income.

What is the mix here, buy from you directly and buy from your supplier?

Like the exclusive 1, like the [indiscernible] woman, for that part, for the exclusive part, we would -- they need to buy from us. But for other type of fixed-price products, they need to buy from suppliers.

So right now, it's a meaning of those light-weighted product, right, because the ASP is still very low.

Sorry? So right now, what?

Still the lightweight product because actually, the ASP is just is just at 2,000.

Yes. Yes, that's why we plan to launch high-weight products going forward -- more high-weight products going forward.

Our last question comes from the line of Anne Ling from Jefferies.

Kathy, it's Anne here from Jefferies. Just very small questions. Most of the questions has been asked. First, just want to clarify, what -- you just mentioned, so for the 20% -- nearly 20% increase in same-store sales. That's mainly for our -- this is basically for our self-operated store, correct?

And then for the license, this is what Tiffany mentioned, as more than 20% same-store. I just want to clarify this.

No. Actually, the 20% is top of our overall simple sales for, including licensed shops and self-operated shops. And actually, for licensed shop, it's not -- is nearly 20%, not above 20%.

Okay. Got it. Got it. Good. And then my second question is from like how often do you raise the price your fixed-price gold product. For example, at last year, how many times that have you raised it? And then this year, what is your plan? Do you have any like normal schedule for your fixed-price gold, so as to protect your margin, right? Yes.

In fact, we don't set a static kind of a period for adjusting our prices. Actually, it all depends on the gold -- the price -- gold price fluctuation. So normally, we set a kind of a percentage variance. If you exceed that percentage, then we'll adjust. And then it's not -- kind of not adjusting everything. It depends on which type of product is exceeding that kind of threshold and would adjust. So it depends. Not -- yes.

Yes. Okay. So when was the last time you adjusted your fixed price product in a bigger manner?

I guess, it's is something like maybe last month or last 1 or 2 months.

Okay. Okay. How much did you increase.

It's kind of -- not only if it's about a certain percentage, it's certainly something like -- kind of a change in 5 or -- more than 5% or 8%, we would start to adjust.

Okay. Got it. Got it.

But not all products.

Got it. Got it. And my final question. So for your store opening, about 50 net store opening for year 2026, right, in the fiscal year for Mainland China, are you -- like where is this growth coming out from? Like are these [indiscernible] where additional store be located in terms of region or by city tier? And then also secondly, do you think you are actually getting some store -- some franchisees, for example from other brands going to your store? Yes, that's my final question.

Okay. Now actually for the net addition expected in the Mainland, we don't -- in the first half, we should expect a drop in the overall -- in the net addition because we can still see our closure -- kind of closure in the -- especially in the licensed shops area. So we should not expect to have a net addition in the first half. In the second half, we still start to see kind of a net addition coming back. And then it's not -- I guess for those net additions, mostly it would be 3DG brand. And because it's still small in terms of scale within Mainland, so we won't focus in various certain areas. It's kind of widespread, but most likely with mainly from the -- like the first tier cities and fourth and fifth tier cities kind of polarization. So we start from the high end one and the low end one.

So we come to the end of our conference. Thank you all for joining us today. If you need an audio replay or any assistance, please e-mail us at [email protected]. We hope you have a nice day. Goodbye.

Thank you. Goodbye.

Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect.