Hong Kong retailer Chow Tai Fook Jewellery Group Ltd reported a 36.6 per cent drop in annual profit due to the Covid-19 pandemic but said it remains confident about a recovery in China's jewellery market.

The jeweller expects a 20 per cent to 30 per cent increase in sales in China in the coming fiscal year as economic conditions improve, company Executive Director Hamilton Cheng said during a live audio webcast announcing Chow Tai Fook's annual results. 

In its filing to the Hong Kong stock exchange, the group said, "Despite the recent headwinds, we remain optimistic about the mid-to long-term prospects of the jewellery market in mainland China." 

Amid a bullish sentiment on China, Chow Tai Fook said the situation in Hong Kong and Macau will remain challenging. 

The company reported a 14.9 per cent decline in revenues to HK$56.8 billion (about US$7.33 billion) in its financial year ending March 31, largely due to the pandemic, higher gold prices that dampened demand, and a weak performance in Hong Kong.

Profit fell to HK$2.9 billion (about US$374 million).

Same-store sales in China and Hong Kong and Macau were down 15.1 per cent and 38.7 per cent, respectively.

Revenues in China dipped 3.9 per cent during the period in review while those in Hong Kong and Macau and other markets dropped by 34 per cent. China accounted for 71.8 per cent of the group’s overall revenues.

By product category, sales of gold products slid 16.3 per cent while gem-set jewellery saw a 17.5 per cent decline. The average selling price of gold products meanwhile rose 17 per cent and 14 per cent respectively in China, and Hong Kong and Macau.

The group expanded its retail network to 3,850 points of sale (POS) as of March 31, with 716 new POS in FY2020, 711 of which are in China. The company is eyeing to open 400 to 450 POS next year.

“In Hong Kong and Macau, we shall continue to consolidate our retail network, rationalise cost structure and refine our business strategies,” said Chow Tai Fook. “On the other hand, we shall maintain our mainland China expansion plan through the franchise model as the situation stabilises.”

The group added that it will continue to invest in technology and talents to boost efficiency of operations.