Hong Kong jeweler Tse Sui Luen (TSL) recorded a loss for the full fiscal year amid waning appetite for diamond jewelry in China.

The retailer reported a loss of HKD 374.3 million ($47.9 million) for the 12 months ending March 31, it said last week. That compared to a loss of HKD 71.5 million ($9.2 million) a year ago.  

The company primarily attributed the loss to a “significant” drop in consumer demand for natural-diamond jewelry, which sells at a higher price point than plain gold. The reopening of the border between Hong Kong and the mainland at the start of the year spurred an initial increase in sales, which died down after a few months, the company said. 

“It was a very challenging year for the group,” the retailer explained. “Following the easing of [the] pandemic…the group observed a mild recovery of the retail industry at the beginning of the year. However, the worldwide geopolitical tension and the persisting deterioration of the global economy…inevitably affected consumers’ spending behavior and sentiment throughout the year. Accordingly, the performance of the group was greatly affected by the significant decline in consumer demand for natural-diamond jewelry products, especially in the mainland China market, and diminishing profit margins arising from the adjustment of sales mix to 24-karat gold products with a relatively lower profit margin.” 

Group revenue for the year increased 2.5% to HKD 2.65 billion ($339.8 million). In Hong Kong and Macau, sales rose 25% to HKD 821.4 million ($105.1 million) as the municipality’s borders reopened and tourism resumed. In addition, revenue was buoyed by various campaigns the government implemented to spur sales, including a voucher scheme and cultural and entertainment programs. 

 Sales slipped 7% to HKD 1.69 billion ($216 million) in China. The consolidation of property markets on the mainland dampened consumer sentiment and slowed spending, TSL noted.  

“In 2023, the group observed a slight uptick in sales performance of its self-operated stores but witnessed a decline in the turnover of its franchising stores. This was mainly due to considerable decline of market demand for natural-diamond jewelry, in contrast to a significantly increasing consumer demand for 24-karat gold products. The group reacted proactively…by enhancing the sales in 24-karat gold jewelry products. The increasing sales of 24-karat gold products with a comparatively lower gross profit margin to that of natural-diamond jewelry products, however, contributed to a significant reduction of gross profit margin as a whole during the year.” 

Image: A TSL store in Hong Kong. (Shutterstock)