Chinese models show the jewelry at the Luxury China 2013 exhibition on June 22, 2013, in Beijing, China. (Photo : Getty Images)
Chow Tai Fook Jewelry Group Ltd, the world's largest publicly traded jewelry chain, announced plans to expand in the U.S. market by selling diamonds to retailers, as it seeks to offset China's recent economic slump that has led sales of luxury goods to plunge.
Chow Tai Fook is eyeing a new wholesale business in the United States before the year ends and has set up a team to conduct feasibility studies, Kent Wong, managing director with Chow Tai Fook, told China Daily.
Unlike the company's U.S. division, Hearts on Fire, which mainly sells its own brand of diamond jewelry to franchisees, Chow Tai Fook will sell polished and rough diamonds to retailers, he said.
"We are interested in the US market because it has the largest demand for diamonds in the world. It contributes 40 percent of diamonds sales," Wong added.
Chow Tai Fook acquired Hearts on Fire in 2014 for $150 million in a bid to introduce the U.S. luxury brand to China. But the move has been fraught with challenges as the recent economic slowdown damped the buying habits of high-end consumers. The Hong Kong-based chain saw its net income slump 46 percent for the year as of March 2016, as mainland tourists have begun to skip the island for other shopping destinations.
Chow Tai Fook's entry into the U.S. may come with challenges, said Hannah Li, a senior analyst in Hong Kong-based consultancy UOB Kay Hian Ltd.
"The company's not expanding into a familiar market but it's considering a lower-margin, wholesale business in a new market where it needs a lot of time to expand its business networks," she said.
Hong Kong-listed Chow Tai Fook rose as much as 1.4 percent in trading on Tuesday. It has gained 18 percent this year, after plunging to a record low in January. Hong Kong's benchmark Hang Seng Index remains virtually unchanged.
Since its acquisition of Hearts on Fire, expanded the brand in the Chinese market with approximately 149 sales locations, Chow Tai Fook reported in June. An estimated 80 percent of Hearts on Fire's revenue were from its wholesale business to franchisees, according to the company.
Instead of breaking into a brand-new retail market on its own, the new wholesale venture will give Chow Tai Fook to test the waters, said Wong.
"We will seek to partner with local retailers who know the market well."
