Luk Fook Holdings (International) Limited (0590.HK) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to Luk Fook's FY 2021 Interim Results Announcement. At our customers' request, this conference will be recorded. [Operator Instructions] Now I hand you over to Koey, who will lead you through this call. Please go ahead.

Good evening, everyone. Thank you for joining the call. I'm Koey from the IR team of Luk Fook. Today, we have the pleasure to have Dr. Kathy Chan, Executive Director and CFO; and Ms. Nancy Wong, Executive Director and Deputy CEO of the group, as speakers to talk about our financial year 2021 interim results. We will go through the corporate presentation, which is already uploaded on to our corporate website, followed by the Q&A session. Now may I pass the time to Kathy for the presentation?

Thank you, Koey. Good afternoon, ladies and gentlemen. Thank you for joining Luk Fook's FY 2021 Interim Results Conference Call. I would like to start with looking at our financial highlights, followed by a financial review and then our future plans and strategies. The details are recorded in the corporate presentation, which has been uploaded to our website. I would like to go through that with you on the phone now. Let's look at Slide 4 about the first half FY 2021 financial highlights first. With the continuing impacts of COVID-19 pandemic and high gold price, Lukfook Group's revenue dropped by 47% to HKD 3.3 billion while operating profit decreased by 41.4% to HKD 387 million. The group's profit attributable to equity holders decreased by 41.3% to HKD 291 million. The basic earnings per share also decreased by 41.2% to HKD 0.50. With the strong net cash position, the group proposed an interim dividend of HKD 0.225 per share and a special dividend of HKD 0.275 per share, coming up to a total of HKD 0.50. The dividend payout ratio is 100.8%, which is higher than our official dividend payout ratio or our official payout policy of 40% to 45%. During the period under review, the group has net increased 60 stores worldwide, which were mainly Lukfook-licensed shops. As at end of September 2020, including the sub-brands, the group has 2,180 shops worldwide together. Now let's look at Slide 6. Yes, at the Slide 6 for our detailed financial performance. During the period under review, despite the drop in revenue, overall gross margin increased by 3.3 percentage points to 33.2% because of the substantial rise in gold price. Gross profit, therefore, decreased by 41.2% only to HKD 1.1 billion while the group's revenue dropped by 47%. On the other hand, total operating expenses decreased by 27%. Its ratio to revenue, therefore, increased by 6.5 percentage points to 23.7%. The negative impact of such ratio increase was offset by the increase in other income by HKD 89 million, a decrease in other losses by HKD 64 million and there was no impairment losses on the CB of HKD 56 million as in the same period last year. The HKD 89 million increase in other income was mainly because of the HKD 58 million salary subsidies from the Hong Kong government and the increase in VAT refunds as other government subsidies of HKD 25 million together in Mainland. The HKD 64 million decrease in other losses was because of the reduction in exchange losses by HKD 39 million and decrease in gold hedging-related losses by HKD 36 million, the impact of which was partially offset by the HKD 20 million loss on financial guarantee in relation to banking facilities offered to an associate. Therefore, our operating margin maintained at a double-digit level and increased by 1.1 percentage points to 11.6% while net margin increased by 0.9 percentage points to 8.8%. Now let's turn to Slide 7. By unfolding our keen targets in reducing inventory levels, our inventory balance decreased by 8.1% since end of March 2020 to HKD 6.9 billion. However, with the faster drop in revenue, average inventory turnover days grew by 251 days to 622 days as compared to the same period last year. With a satisfactory drop in inventory levels, the group's net cash increased to HKD 2 billion. ROE was 5.1 -- 5.5%, which was 4.1 percentage points lower than the same period last year. The group's NAV per share as at end of September 2020 was HKD 18.11. Now let's look at Slide 9. During the period under review, the overall gross margin grew to a record-high level of 33.2% because of the rising gold price. Meanwhile, the operating margin in the past few years remained at quite a stable low double-digit level and the net margin maintained at a stable high single-digit level. Let's look at Slide 10 now. As a result of substantial decline in number of businesses due to the continuing impact of pandemic, revenue from Hong Kong, Macau and Overseas market decreased by 68.1% to HKD 1.2 billion, which accounted for 34.7% of the group's revenue as compared to the 57.6% in the same period last year. Its segment loss was HKD 93 million. In the Mainland market, the revenue declined by 18.3% to HKD 2.2 billion, accounting for 55.3% of the group's total with the segment profit maintained flat at around HKD 508 million. During the period under review, the group's retail revenue substantially decreased by 61.5% to HKD 1.7 billion with its mix to the group's revenue dropped to 51.7% from 71.2%. Its segment loss was HKD 22 million. The group's wholesale business revenue fell by 12.2% over the corresponding period last year to HKD 1.2 billion, accounting for 36.1% of the group's total revenue. The segment profit decreased by 10.8 -- 10.6% to HKD 147 million, accounting for 35.5% of the total. Its segment profit margin was 12.2%. With a decreasing demand due to the strong gold price and the impact of poor macroeconomic conditions on consumer sentiment, sales amount of gold and platinum products substantially decreased by 52.5% to HKD 1.3 billion during the period under review, accounting for 43.6% of the overall sales amount, which was the group revenue minus licensing income. Its gross margin rose by 7.1 percentage points to 28% because the average gold price rose by around 30% during the period under review. Gross profit of gold and platinum products, which is equivalent to consolidated gross profit of the group minus gross profit of licensing income, therefore, declined by 36.3% to HKD 358 million, accounting for 44.3% of the overall gross profit against the 35.9% in the same period last year. On the other hand -- by the way, we have renamed gem-set jewelry to fixed-price jewelry since the first quarter announcement in current financial year regarding our operating data in order to distinct its difference against gold and platinum product categories, which refers to gold and platinum products sold by weight based on international market size that is at a non-fixed price. They are of 2 different gross margin categories. So sales amount of fixed-price jewelry products also fell notably by 47.7% to HKD 1.7 billion, accounting for 56.4% of the overall sales amount. Its gross margins dropped by 4.5 percentage points to 27.2% because of substantial decrease in sales mix of its retail business, which was at relatively high gross margin and the discounting activities in Hong Kong, Macau market for slow-moving stocks. Such drop in gross margin should be temporary and should go back to normal after the pandemic. Its gross profit as a result decreased by 55% to HKD 451 million, accounting for 55.7% of the overall gross profit. Now let's look at Slide 12. As a result of the substantial decline in the number of visitors due to the continuing impacts of pandemic, retail sentiment in the Hong Kong, Macau market has been weakening. According to the government statistics on visitors' arrivals, Mainland visitors to Hong Kong from January to September 2020 fell by 92.7% year-on-year to 2.7 million while that for Macau fell by 85.9% year-on-year to 3.02 million. During the period under review, retail revenue from Hong Kong, Macau and Overseas market, therefore, decreased by 70.7% to HKD 1 billion, which accounted for 89.4% of its total. Its segment loss was HKD 105 million. Due to the sale of excessive gold raw materials, Hong Kong's wholesale business revenue increased by 70% to HKD 98 million. However, because of the increases of its gold hedging loss by HKD 17 million during the period under review, its wholesale business turned from a profit to loss, resulting to a segment loss of HKD 11 million. On the other hand, Hong Kong licensing income decreased by 25% to HKD 24 million. Its segment profit decreased by 23.8% to HKD 24 million. Retail revenue from the Mainland market, including e-commerce revenue, declined by 26.9% to HKD 690 million, accounting for 31.6% of its total. Its segment profit fell by 11.3% to HKD 83 million, accounting for 15.4% of its total. Its segment profit margin was 12.1%. Revenue of the wholesale business in Mainland market declined by 15.8% to HKD 1.1 billion, which accounted for 50.9% of its total. Because of an unrealized gain of HKD 34 million on a fully secured gold loan to a licensee, its segment profit increased by 17.1% to HKD 159 million, accounting for 31.3% of the total. Its segment profit margin was 14.3%. As the increase in the number of licensed shops in Mainland offset the impact of other unfavorable factors, licensing income in the Mainland market fell by 6.3% only to HKD 383 million, accounting for 17.5% of its total revenue. Its segment profit fell by 5.3% to HKD 266 million, accounting for 52.3% of its total. And its segment profit margin was 69.4%. Now let's turn to Slide 16 at our self-operated shops' performance. Our overall SSSG was negative 64% with Hong Kong and Macau market reporting negative 70% and Mainland market reporting negative 30%. Due to the rise in gold price, gold and platinum sales recorded a decline in revenue and quantities but an increase in ASP in all markets. On the other hand, ASP of fixed-price jewelry products in Mainland market increased mainly because of increase in sales mix of diamond products. In the Hong Kong and Macau market, ASP of fixed-price jewelry products decreased mainly because of increase in sales mix of lower-value items. Slide 17 shows the same-store sales growth figures of self-operated and licensed shops in different city tiers and regions in Mainland. Overall speaking, licensed shops performed better than our self-operated shops as licensed shops normally are located at better locations and have better fixed-price jewelry sales mix in Mainland. Furthermore, 69 out of our 79 self-operated shops at end of September 2020 were mostly centralized in northern and central parts of Mainland, where the pandemic was the most serious during the period under review. Therefore, during the period under review, the same-store sales growth of licensed shops was negative 12% while that for self-operated shops was negative 30%. Now let's look at Slide 20. We have TOE, total operating expenses, of HKD 794 million, representing a decrease of 27%. With revenue declining faster, its ratio to revenue increased by 6.5 percentage points to 23.7%. And the adoption of Hong Kong -- HKFRS 16, rental-related expenses, including rental-related depreciation of right-of-use assets, fixed and variable rental and interest expenses, amounted to a total of HKD 223 million, representing a 38.3% drop year-on-year. There were 72 shops in Hong Kong, Macau subject to rent review in FY 2021, accounting for around 30% of the total number of shops. The overall rental reduction was around 36%. But most of the renewals were short term of 1 year. Therefore, we would have 50% of our shops subject to rental renewal next financial year, that's in FY 2022. Apart from the reduction on renewals, we have around HKD 50 million rent concession from landlords because of the pandemic during the period under review. Now let's go to the CapEx page on Slide 22. In first half FY 2021, the group incurred CapEx of HKD 177 million, which included the acquisition cost HKD 46 million of staff accommodation or staff quarters in Macau and HKD 99 million prepayment for acquisition of office and showroom in Shenzhen and HKD 4 million prepayment of plant expansion project in Panyu. Let's look at Slide 23 now. Contributed by the ongoing pandemic and the effect of HKD 20 million loss on a financial guarantee contract in respect of banking facilities, the loss in HKRH and subsidiaries widened. However, during the period under review, there was no impairment loss on amount due from HKRH as in the same period last year. As a result, its total loss of investments and operating activities narrowed to HKD 51 million against the HKD 73 million loss in the same period last year. Now let's look at the group's future plans and strategies. Prior to the period under review, the group has set up its new 3-year -- actually, in the last financial year, the group has set up its new 3-year corporate strategy, Supply Chain Management, Mainland Market Expansion and Strategic Growth as its 3 main focuses so as to foster its future business growth. In order to further enhance the group's competitive edge, the group will focus on strengthening supply chain management through various means. We will try our best endeavor to identify right products, set right price and allocate right products to the market -- allocate products to market at the right time by implementing a higher level of automation and big data management; improving factory productivity; shortening inventory turnover period; establishing strategic partnerships with suppliers; streamlining logistics on distribution and intensifying support to licensees. Having all this would help us promote our business development and strengthen our operational efficiencies and effectiveness. Let's look at Slide 27 now. The group has already adopted a multi-brand strategy and will strive to develop more new brands in the future. During the period under review, we have net added 20 Goldstyle shops. In Slide 28, it shows our new brand, Lukfook Joaillerie. This brand targets at the high-end jewelry sector and features exquisite design and craftsmanship, including award-winning jewelry masterpieces. The first shop-in-shop was opened in Macau in July 2020 and one additional shop-in-shop was opened in Mainland in September 2020. We target to open 2 more shops next year. Slide 29 shows our expansion plan in FY 2021, that's the current financial year. As at 20 November 2020, including the new branch, we have a total of 2,222 shops worldwide while there were 2,180 shops by end of September 2020. As Mainland remains the market with growth potential in the mid- to long term, the group will continue to focus on business expansion in the Mainland. The target for net additional Lukfook shops in Mainland for this financial year will be adjusted upwards to around 250 shops, mainly focused on opening the licensed shops in fourth and fifth tier cities, while the target for net additional new brand stores in Mainland is 50 shops, which will also be mainly licensed shops. The group is also committed to further developing its e-commerce business and strengthening cooperation with various e-commerce platforms in Mainland, aiming to sustain the growth in e-commerce revenue at a target of 15% growth in this financial year. As we look at some time for the Mainland tourists to come back to Hong Kong and for retail atmosphere to resume normal, the group will net reduce 2 shops in Hong Kong and seek opportunities to net add 2 shops in Macau in the current financial year. The CapEx budget for FY 2021 will be around HKD 250 million, which will be used for shop renovation, Nansha plant and office renovation, purchasing equipment and purchase of property as well. Now let's go to Slide 30 about the e-commerce business. In first half FY 2021, the e-commerce revenue increased by 23% and the revenue accounted for 36.2% of the group's retail revenue in Mainland with a stable ASP of CNY 1,300. It accounted for 21% of the group's retail revenue as compared to the 6.6% same period last year. We currently have 15 platforms, including Tmall.com, JD.com and VIP.com. In light of the enormous spending potential of young consumers on online sales platforms, we opened official e-shop on social media, including Douyin and RED, Xiaohongshu. We have allocated more resources on short videos and the group enhanced live stream sales in order to expand footprint in the young consumer market. Now let's look at Slide 31. The group also continued to capture the rapid growth of online marketing by various marketing activities in new media platforms. The main use of trending social media platforms, including Douyin, TikTok -- Douyin, Xiaohongshu and e-sports to increase our brand exposure and as well as footprint to the young consumer market. We expanded online sales by live streaming by staff and KOLs and enhanced our CRM via instant messaging apps to reach and engage with customers. We are now on Slide 32. As the group's anniversary is just a few days after Double Seventh Festival, we invited our global brand ambassador, Mr. Li Yi Feng, to show up at the live stream event, which recorded over 12 million views that effectively enhanced brand awareness and create a hot topic. Let's go to Slide 33. To celebrate this grand anniversary, we collaborated with 100 KOLs on 5 major social media platforms to conduct an all-round product promotion. Three topics on anniversary promotion altogether gained a total of 700 million views and 1.2 million discussions. On Slide 34, apart from the hashtag campaign on Bilibili and TikTok, which recorded tens of millions views, posts of 30 KOLs had a total exposure of 15 million views on Xiaohongshu. The topic attracted 10 million views and nearly 6,000 participants joined this contest, which once again raised Luk Fook's brand awareness among young consumers. The same-store sales of Hong Kong and Macau market were around negative 40% in October 2020 and negative 30% in the first 3 weeks of November, which were further narrowed from the negative 46% in September 2020. Besides, the overall same-store sales of the Mainland market, including both self-operated and licensed shops, recorded a low single-digit growth in October 2020 and a high single-digit growth in the first 3 weeks of November, a turnaround from negative to positive as compared to the negative 5% in September 2020. Furthermore, the group will keep on freezing salaries and maintaining natural turnover measures for the upcoming year. And we'll continue to negotiate with shop landlords to seek for rental concessions so as to reduce costs. To conclude, subject to the development of this pandemic, since that the worst is over, we expect that same-store sales in the Mainland market to turn around to an increase in the quarter of October to December 2020 while the same-store sales in Hong Kong and Macau market may revert to a positive growth in the quarter of January to March 2021 in light of their low base. In view of us anticipating considerable growth of the middle-class population in Mainland, the group remains optimistic about mid- to long-term business prospects. And we are focused on expansion in the Mainland market. The group looks forward to regaining its business growth momentum in the near future. This is the end of my presentation, and thank you for listening.

Thank you, Kathy. Moderator, please open the floor for the question now.

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

Yes, it's Mavis here. Thanks very much, Kathy, Nancy, for arranging the call tonight. And I hope to get a little bit more information in terms of third quarter performance. You just mentioned about expectations for same-store sales performance and perhaps into the second half, China to turn positive same-store growth in the current quarter and then Hong Kong, Macau, the fourth quarter probably. So what about the profitability trends in both markets into the second half of this financial year? Could you also give us some guidance in terms of your store mix in shopping mall and the street-level stores, given the situations, especially in Hong Kong, Macau that -- in Hong Kong, particularly, that we've seen with the social events and also the COVID-19 impacts over the last 20 months? Which kind of store mix level do you think would be an optimal level?

Actually, of course, for the second half of the year, we expect that profitability will be better than the first half. So basically -- actually, we have, for the first quarter in last financial year, it was not too bad altogether. But the first quarter was really -- of course, it was really bad because the pandemic actually started from end of January. So basically, we should expect to grow -- some growth in the second half against the second half of last financial year. And then when we talk about the Hong Kong, Macau market, actually, recently, we can see that the worst shop location will be likely on the tourist area. At Tsim Sha Tsui, Causeway Bay, Mong Kok, they've been hit the most. And that's why we need to reduce shops in those areas while some of the residential areas are doing quite well and some of them -- some of the shops in the residential areas are actually profitable. So basically, it's kind of -- you can see that we did not really plan to reduce too many shops in Hong Kong. Our target has been reduced from the 5-shop reduction to 2-shop reduction only because of the reduction in rental from the landlords in the past 2 months. So basically, we have some kind of allocation from the tourist area to the residential area. So basically, of course, with the improving same-store sales growth figures, we should expect better results going forward in our Hong Kong and Macau market.

Great. Thank you, Kathy. Just to follow up about profitability, is it possible to give us some guidance in terms of like gross profit margins and perhaps some cost ratios that we've seen, like on Page 20 of your slide, for the second half of the financial year so that we can have a quite clear picture?

In fact, no matter how the gross margins fluctuate, you can see that we have maintained quite stable operating margins at low double digits and net margin at high single digits in the past few years. So basically, I guess maybe we should expect something like that.

Next question, we have Emily Lee from Nomura.

A couple of questions from my side. First of all, can we comment -- because I do understand we have restated our margins for gem-set to fixed-price. But I'm just wondering if you can give us a sense of what's the gross margin for gem-set in the first half of this fiscal year, so just to get a sense of how it is trending for your gem-set jewelries. Secondly, it has to do with the employment subsidy. Just wondering how much did we book for the first half. And what's the expectation of the subsidy to be booked in the second half as well? And lastly, just want to touch upon your multi-branded strategy because it seems as though that we have 3 brands right now for -- besides the Luk Fook brand. So I just want to know what sort of performance we are seeing, in particular for Goldstyle as well as Dear Q. Because these 2 brands, I think, they have had over a year of operations already.

For the gross margin of gem-set, actually you can see that in the current period of time, they reduced by a few percentage points. And that's mainly because of the reduction of retail sales mix, which is off -- which was off high gross margins. And then there was some discounting activity going on for the slow-moving stocks in Hong Kong, Macau market. So basically, we normally should have something like more than 30% gross margin for gem-set jewelry. So basically, I think we should expect a faster gross margin in the second half against the first half because of the gradual improvement in the retail performance. And for the second question, I can't hear it clearly. Nancy?

Employment subsidy.

The amount we have received from Hong Kong government for the first half would be something like HKD 58 million. So actually, HKD 40-something million in August and HKD 40-something million as the second tranche. And part of that would fall into the period up to September. And then for the multi-brand strategy, so actually, when we talk about the -- we've got Goldstyle as a new brand, which expands faster than Dear Q. Dear Q is only a limited number of shops, so maybe we should -- I don't think we should talk about the performance at the moment for Dear Q. But for Goldstyle, actually it's kind of a smaller-scale investment. And it's quite easy to make profit by the licensee. So basically, that's why it can be opened in such a quick manner because the licensee, most of them are making a profit.

A quick follow-up, I'm not sure if I missed the -- I missed it in your presentation. Can we talk about the franchisees' profitability in first half of this fiscal year, the percent of the margins and also...

The profitability, actually we only know the first figure, the inventory balance and the gross profit level. And basically, because of the -- because of the rise in gold price, actually they also benefit from that. So they should have -- you can see that the performance in Mainland will be actually better than in Hong Kong, Macau market.

Next, we have Lina from HSBC.

I heard something like HKD 50 million rental concession in Hong Kong. I'm not sure if I heard it correctly. So do you expect any like rental concession like in second half and if HKD 50 million was the right number in first half? And then you also mentioned that on renewal, it's more short term, like a 1-year term. So how do you expect the rental cost overall will be like for the full fiscal year and also into next year?

In fact, rental concession from landlords, I was talking about [ HKD 50 million ] in the first half. But in the second half, you should expect that to be much lower because the situation would be better. Especially like in Macau, we can see that the performance is getting better and better and it may go back to normal sometime later. So basically, we -- like in the past month, the past few months, we may see kind of a waive of rentals for some of the shops in the hotel areas or casino areas. But now because of the -- because the cross-border activity restrictions will be less than before, so basically the performance in the Macau market is getting -- is actually improving in a quite good manner. So that's why we -- you should not expect the rental concession to be that much in the second half. And for the rental renewal, the short-term one, because some of the landlords were willing to reduce rental by maybe 50%, 60% or 70%, but they were only willing to renew for 1-year short-term one, so basically, next year, we don't know exactly what it would look like, but all depends on the pandemic. So basically, next year, for the original 3-year lease, we should see a reduction. But for the one -- the short-term lease, it's hard to tell, maybe at a stable -- or kind of a flat or maybe some certain increase. It's hard to tell at the moment, really. And for the full year rental cost, because in the first half we have seen kind of 38% reduction already, so basically for the second half -- or for the full year, we should expect kind of double-digit drop for the rentals.

Okay. So double-digit drop for full year FY '21 is more like a 20% drop or like -- or like high 20s or like what is the...

Maybe -- I guess maybe minimum 20%.

Okay. Got it. And I also have a question regarding the profitability. Have you calculated what is your break-even sales level at Hong Kong and Macau?

In the past, we did some calculation. It's something like maybe 50% drop. But that's talking about gains, something like maybe -- the year before last year's level.

Okay. So it's against FY '19 level, right?

Yes. Okay.

Got it. I have no further questions.

Next, we have Anne Ling from Jefferies.

It's Anne here. Sorry, I missed your third quarter to date same-store sales trend. Would you repeat? I only heard about like that third quarter, you're expecting a positive growth for China and a positive growth for Hong Kong in 4Q. Is that correct?

Yes. That's correct.

Yes. And what about the current, like -- so like, I mean, quarter-to-date, what -- could you share a little bit more [indiscernible]?

In fact, in the announcement, we've mentioned about that already. So in October, Hong Kong, Macau market is talking about negative 40% same-store sales figure. And in the first 3 weeks of November, it's negative 30%. So it shows a certain improvement against the negative 46% in September 2020. And then for Mainland market, the overall same-store sales figure, that's including both self-operated and licensed shops, because we've got only 79 self-operated shops, so it's not representative. So all this together, we've got some low single-digit growth in October 2020 and a high single-digit growth in the first 3 weeks of November. It is kind of a turnaround of the negative to positive as compared to the negative 5% in September 2020. That's why we expect the first -- the third quarter, October to December 2020, Mainland market to turn around to a growth again for same-store sales. And then for Hong Kong, Macau market, we should expect that to turn back to a growth mode in the last quarter, that's January to March 2021, because of the low base.

Got it. And if I take a look at the government's retail sales number for China, I think like October and -- let's say, October. November is not out yet. It was up like around 17%. So do you have a similar growth if you include the new store opening? Or do you think that we lagged behind the government's number? And if that's the case, why is that? Do you think that local competitors are actually more aggressive than the Hong Kong jewelry companies?

We don't really know the contents of that statistic. But then we have compared the retail amount, I mean, altogether for all the shops, both self-operated and the licensed shop altogether in the -- July to September quarter, we compare that to the local brands, some of the local brands. And most of the brands are talking about a decline mode. But then for the top 2 local brands, they talk about low single-digit growth. And for us, we are also at kind of a low single-digit growth. So quite similar, actually, when compared to the large one, they're both performing well.

Okay. Got it. And for your same-store sales growth announcement, that's only including your own retail store? Is that correct?

Yes. For same-store sales growth figure, we mainly -- it's including only the self-operated shops. But then we have announced such same-store sales figure for the licensed shop as well, but it will be stated clearly in the announcement.

Yes. So for the third quarter -- or for the -- sorry, not for the quarter -- for the first half, do you have like any information about like your franchisees or your licensed stores' same-store sales? Are they better than the self-operated brands? Or are they like a little bit more...

Yes. Actually, we've got a slide showing that, that's on -- let's see, that's on Slide 17. So for licensed shops in the first half there, their overall same-store sales was negative 12% while our self-operated shops in Mainland was negative 30%. So we've explained the reason why we performed worse than the licensed shops, mainly because they are mostly located at better locations and have a higher gem-set mix -- sales mix normally -- fixed-price. But then for our self-operated shops, actually by end of September, 69 of that, out of the 79 self-operated shops we have, were located in northern and central parts of China, which were -- where the pandemic was the most serious during the period under review. That's why we performed that worse in that -- in the first half for our self-operated shops in Mainland.

Next, we have Chris Leung from Franklin Templeton.

I just wanted to ask about the strategy on the e-commerce business. I mean it's still a 20%-plus growth business. But I mean, basically, in the past years, like talking about more than that. So what are we planning in terms of the e-commerce side? Or how -- I mean do you have any update, will be good. Any color on the e-commerce [indiscernible]

Well, the target was set to be about 15%. But then we actually stretched a bit internally, so that actually asked them to grow more than 15%. That's a more conservative strategy. So in the past years, we actually added a lot of platforms as well. So we have to update the PowerPoint presentation. I just found [indiscernible] on it. And then so we have like more than 30 platforms now. And then the major contributors vastly are still the Tmall, Vipshop and also JD.com. But then we also added the Xiaohongshu and Douyin platforms in the past several months so that it's going to help us to build a brand as well because like there's a lot like videos and also sharing online. And then just like what Kathy just shared in the presentation earlier, we also have like an anniversary campaign. And then so we [indiscernible] videos on these like social media channels, so that which helps the e-commerce business as well.

Okay. So how big is your like teams operating the e-commerce platform business?

Well, our team is in Panyu, so we actually have more than 100 people for the operation. Also, they are deploying staff for like photo sharing and also the marketing team is also helping them as well. Because like a lot of the times when you have marketing campaigns for the online -- for the offline market, we actually try to make it up with the e-commerce sales as well so that there's a synergy between the 2 teams. So that's why we have been doing quite well in the past year. And we hopefully are going to have more growth coming up in the future.

Okay. And just a question on the Goldstyle, how -- like in terms of the store [indiscernible] like sales per stores or any indicators, that's been rolled out for a year. So I just want to see like the expansion is actually very fast. So -- but in terms of the economics-wise, if any color, I don't know if the same-store growth is actually including this Goldstyle numbers or not, but I guess not. So any color on the Goldstyle performance would be appreciated.

Well, we have a Goldstyle collection in Lukfook shops as well. And then we have some stand-alone shops under the brand name Goldstyle and some of the shopping malls in China. So that these collections, [indiscernible] are new product at that time because there is a lot of like traditional gold products in the market. And then when we launched Goldstyle collection, it was actually very fresh to the market. And so nowadays, there are a lot of like other type of similar gold products in the market. So we have to like introduce more styles and more like nicer designs to attract consumer. And also, we're going to be like -- some of the times that we may review the pricing strategy as well. So that we're still optimistic -- positive about the development of Goldstyle collection. If you have a time to visit one of the stores in China, you can actually see that the Goldstyle brand is very outstanding, very fashionable. So a lot of like customers in China, like even the youngsters, they are still wearing gold products. And then so this Goldstyle product is more fashionable, not like those traditional [indiscernible] gold products that's more -- some of people might find it more old-fashioned. So that the Goldstyle product is one of the things that the youngsters may like.

There are currently no questions in the queue. [Operator Instructions] We have one more question from Mavis from DBS.

Talking about Goldstyle, actually, can you give us a breakdown in terms of your fixed-price gold products versus total sales of overall gold and platinum products, or should I say overall sales of your gold in China and also in Hong Kong, Macau, respectively? And just now, I think Kathy also mentioned about, in Macau, actually, we have been seeing recovery in a good manner. So is it able to give us a little bit more color in terms of your contribution of sales from Macau so far in the past 3 months versus perhaps the first quarter of this financial year? And what about sales proportion? Do you disclose that for Macau as well?

We want to talk about it, talk about [indiscernible]. Let me see. So in fact, talking about -- just talking about the July to September quarter, actually, [indiscernible] may be something like 12% of the group total for the retail revenue. But normally, it's just something like maybe 20-something percent actually in the past.

Right. So this is the fixed-price product sales, right?

No, it's the overall, the overall of the -- you talk about the fixed-price gold product? Let me see. Well, we just talked about the fixed-price gold product in Macau from July to August -- from July to September, it's only maybe around -- it's really a very small portion, really around just 4% of the group's retail revenue, it's a very minor one.

So I see what you mean. Kathy, you were saying that 12% was for the total for the group for fixed gold price sales, so -- [indiscernible] December, right? And then [indiscernible] in the past year...

Is that what said?

Yes.

Yes. Maybe we can talk to you individually and maybe understand your question in a more detailed manner. Because I'm not too sure what you you're asking.

Okay. Never mind. And can you also comment a little bit in terms of your Macau recovery, please?

For the Macau market, actually, we can see that it improved in the month -- several months before September. We're talking about 90-something percent drop in same-store sales. And then in September, just by end of September, the cross-border restrictions were relaxed. So basically, we've seen something like 50% drop only. And then in October, it's something like 40% drop. And then in first 3 weeks of November, it's something like 27% drop. So basically, it's improving in a good manner.

Our next question is from Tony Li from Haitong International.

So my question will be on the store expansion. So would you comment on the store expansion number for the next 2, 3 fiscal years? So this year is around 250. So about next fiscal year?

In fact, we have set our 3-year plan in the last financial year talking about per annum net additional 200 shops, including 150 for local brand and 50 for new brands. So basically, that should be our normal target. But in this financial year, because we have kind of -- we can see that the -- I mean, the licensee are willing to have a fast expansion so that we have upgraded our targets to 250 Lukfook shops and 50 new brands. So basically, maybe we can expect kind of similar growth momentum in the coming 1 or 2 years.

All right. As there are no further questions right now, I will hand the session over to you, Koey, for closing statements. Please go ahead.

Thank you, Kathy and Nancy. And thank you very much for joining the call everyone. Have a nice evening. Bye.

Thank you. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.