The investors who once crowned LAOPU GOLD as king are now retreating as the price of gold turns.
In early July, the share price of LAOPU GOLD (ASX: 06181) fell to a low of HK$342, representing a decline of over 60% from its high over the past year. The market is repricing not just the cycle of the gold jewelry industry, but the very model of "high-premium gold + luxury branding" itself.
For a long time, LAOPU GOLD has tried to elevate itself above ordinary gold shops and per-gram price comparisons by leveraging ancient craftsmanship, high-end mall locations, and a narrative of "Eastern luxury."
When gold prices were rising, the logic of gold was LAOPU GOLD's most potent booster: gold provided expectations of value preservation, while the brand offered aesthetic, gift-giving, and status value, amplified by social media platforms and scalpers.
Consumers were willing to believe they were purchasing not just gold, but a higher-order consumption symbol.
However, with the decline in gold prices, this same gold logic has become its most difficult constraint to escape.
Consumers are recalculating the value of gold versus brand premium, scalpers are reassessing price differentials and resale margins, and institutions are re-examining online sales, same-store performance, and inventory turnover.
As long as "pure gold" remains the core material, it must repeatedly prove that its premium is not an illusion borne on the tailwind of rising gold prices, but a genuine brand value capable of enduring gold price cycles.
This is the inescapable Möbius strip for LAOPU GOLD: the more it tries to use its brand story to detach from the per-gram gold price, the more it is pulled back to the price of gold itself during fluctuations.
The Core of the Boom Remains Gold
Contrary to popular perception, during its peak period, LAOPU GOLD, with its high per-gram price and "hard luxury" positioning, was not solely driven by luxury consumption logic but was also embedded with a highly realistic arbitrage and value-for-money logic.
In 2025, the weighted average gold price on the Shanghai Gold Exchange rose by 54.8%, while LAOPU GOLD raised its retail prices three times in February, August, and October, with a cumulative increase of approximately 45%.
During the period of unilateral gold price increases, LAOPU's price adjustment lagged behind the broader market gold price, causing its premium relative to traditional gold shops to passively shrink. In 2025, LAOPU GOLD's full-year gross profit margin fell by 3.8 percentage points to 37.6%.
For consumers, when price adjustment lags were combined with high-end mall promotions, credit card rebates, and membership points, the actual final price for LAOPU products was further lowered.
Consequently, those buying high-priced ancient-method gold were never entirely die-hard fans paying for "Eastern luxury." The loyalists queuing up included both affluent luxury clients and a significant number of scalpers and resellers with folding stools, connecting with clients via WeChat.
Puyin International research indicated that resellers accounted for approximately 40% of sales revenue at the SKP store, significantly higher than at comparable malls like MixC, IFC, and Henglong, which do not run large-scale promotions and rebates.
A reseller at SKP told media that before the Lunar New Year, demand for LAOPU GOLD at Beijing SKP was very high, with not only individual customers enthusiastic but also many resellers buying in bulk. Clients would forgo membership points to secure deals at roughly an 8.75% discount, while the points could be resold or redeemed by the resellers later. "People rushed to place orders because they were basically certain LAOPU would raise prices after the New Year."
This perception of "buy now, profit later," fueled by price increase expectations, combined with the Lunar New Year peak season, Valentine's Day, and SKP promotions, collectively drove its sales peak in the first quarter.
For Q1, LAOPU GOLD estimated sales performance of approximately 190 to 200 billion yuan, revenue of about 165 to 175 billion yuan, and net profit of roughly 36 to 38 billion yuan.
Taking the midpoint of the Q1 sales forecast at about 195 billion yuan, this already reached 62% of the full-year 2025 sales; the net profit margin exceeded 20%, higher than the 17% to 18% range for the full year 2025.
However, when gold prices are no longer rising unilaterally, LAOPU's high premium compared to ordinary gold brands is once again exposed to consumer price comparisons.
For ordinary consumers, LAOPU can still represent aesthetics, gift-giving, and a sense of status; but when it comes to recycling or resale, the brand premium is rarely fully recognized, and the per-gram gold price remains the most direct reference.
Puyin International noted in an April report that an SKP mall expert estimated LAOPU GOLD's same-store sales in SKP for April might have fallen 40% to 60% year-on-year.
Given the high proportion of reseller sales at the SKP store, this decline cannot be directly extrapolated to overall performance, but it at least indicates that price-sensitive demand, including from resellers, has begun to soften.
Citi also pointed out in a June report that LAOPU's performance during the Tmall "618" shopping festival was below expectations, possibly related to the loss of price-sensitive customers due to high premiums.
The bank calculated that after the price increase in February 2026 and softer gold prices, LAOPU's premium relative to traditional gold jewelry retailers had exceeded 55%, higher than the pre-2024 level of around 30% and the 2025 level of about 10%.
This change is also reflected in institutional expectations for the second quarter. J.P. Morgan assumed a year-on-year same-store sales range for LAOPU GOLD in Q2 2026 of a decline of 60% to growth of 10%.
Based on its first-half forecast model, this implies Q2 sales performance for LAOPU GOLD of approximately 19 to 55 billion yuan and net profit of about 4 to 11 billion yuan, a clear decline from the first quarter.
Following the sales slowdown, the relationship between gold prices, premiums, resellers, inventory, and the price increase mechanism will enter a phase of reverse validation.
The Necessity Behind Price Hikes
A significant part of the luxury confidence LAOPU GOLD previously gave the market stemmed from its "continuous price increase" momentum during favorable conditions.
Management mentioned during earnings calls that the company adjusts prices 2 to 3 times a year, aiming to maintain a gross profit margin between 40% and 43%.
When ordinary gold jewelry brands raise prices, the market often interprets it as passive cost pass-through of raw materials; when LAOPU raises prices, it is more easily interpreted by the capital market as active brand pricing power.
But this is not just a brand narrative; it is a survival necessity. The reason LAOPU must rely on price increases is that its capital-intensive business model has extremely low tolerance for error and inherently requires a thicker gross margin as a survival buffer.
Traditional gold jewelry companies typically use tools like gold leasing, gold forwards, and hedging to mitigate the impact of gold price fluctuations, separating operational risk from gold price movements.
LAOPU GOLD chose a different path. Founder Xu Gaoming explicitly stated during the 2025 earnings call that the company does not hedge.
This choice is not without logic. LAOPU GOLD sells fixed-price, high-premium ancient-method gold products, not ordinary gold jewelry priced by weight with fluctuating labor fees. Using financial instruments to over-hedge gold price volatility would increase hedging costs and potentially weaken the narrative of "absorbing gold price fluctuations through brand premium."
For management, as long as the safety cushion of around a 40% gross margin remains, gold price fluctuations can be digested through product price adjustments, purchasing timing, and brand premium, without needing to fully outsource gold price exposure to financial tools like traditional gold retailers.
However, maintaining this cushion continuously consumes cash flow.
Over a longer period, from 2023 to 2025, net cash flow from operating activities was negative as LAOPU GOLD "stockpiled inventory."
Furthermore, the direct-operated model naturally involves stronger capital occupation. Opening each high-end store requires a significant investment in gold products for display and stock.
The profits earned by the company are not fully converted into free cash flow but are continuously transformed into gold assets within high-cost procurement, store displays, and channel inventory.
By the end of 2025, its inventory had surged to 16 billion yuan. Consequently, LAOPU GOLD's interest-bearing bank loans skyrocketed from 1.4 billion yuan to 6.3 billion yuan, and it conducted two Hong Kong share placements raising approximately HK$5.4 billion to maintain its cash flow cycle.
In Q1 2026, LAOPU GOLD's estimated sales of 190-200 billion yuan seemingly digested the inventory from the end of the previous year.
However, with an ancient-method gold production cycle of 25 to 90 days, to maintain sales momentum, LAOPU GOLD needed to replenish stock at high gold prices simultaneously during the sales peak.
This means that while recouping cash, it most likely also established a new batch of inventory with higher costs.
Entering Q2, with a cliff-like quarterly decline in gold prices, combined with weaker-than-expected Tmall 618 performance and softening reseller demand at SKP, this newly purchased high-cost inventory collided with a window of slowing demand.
Accounting-wise, a drop in gold prices does not immediately force all inventory to be revalued at market price into the profit and loss statement; impairment is only required when the net realizable value falls below cost. LAOPU's fixed-price system and high gross margin provide some buffer.
But from an operational perspective, the high-cost gold materials have already raised inventory costs.
Even if the gold price drop doesn't immediately create a book loss, it will compress gross margin space in subsequent sales. With weakening end-demand, the difficulty for LAOPU GOLD to continue passing on costs through price increases rises.
The fully direct-operated model lacks a franchise channel as a backstop. Once sales decelerate, high-priced inventory will continue to tie up capital, slow turnover, and conversely erode gross margin space and profit flexibility.
Based on past patterns, LAOPU GOLD's price adjustment in the second half of the year would theoretically arrive around August.
At this point, whether price increases are a long-term privilege of LAOPU as a high-end brand or a necessary means to balance the operational pressures of its capital-intensive model is about to face a real market test.
The Gap to Top Luxury
The capital market's willingness to reinterpret LAOPU GOLD as "Eastern luxury" is not without reason.
In terms of visual presentation, service model, and fixed-price mechanism, it has skillfully aligned with hard luxury: stores are located in prime spots within high-end malls, adjacent to top brands like LV and Gucci.
But this facade is inseparable from the mall's highly pragmatic profit structure. LAOPU's trump cards are the high transaction value inherent to gold, the high gross margin from ancient-method gold, and the high single-store output driven by both high-end gifting and reseller demand.
As early as 2023, before LAOPU gained widespread social media popularity, the annual sales revenue of the Beijing SKP store had already reached 335 million yuan, with revenue per square meter exceeding 5 million yuan; until the mall's anniversary sale in April this year, it remained the undisputed sales champion.
The mall's willingness to place LAOPU next to major brands does not equate to full recognition of its luxury status. A more realistic explanation is that during high-growth phases, it helps the mall achieve sales per square foot and performance KPIs.
Over the past year, LAOPU GOLD entered a clear period of accelerated expansion: planning to open 10 new stores for the full year, a net increase of 9, while upgrading and expanding 9 existing stores in its network.
Store performance can buy prime physical location, but location cannot buy luxury order. Luxury is never born from "standing next to whom."
Beyond simply emphasizing the "ancient-method gold" craftsmanship narrative, LAOPU GOLD has initially established a level of symbolic recognition and popularity base distinct from most gold jewelry brands through hit products like butterflies, rose windows, and vajras.
But popular cultural symbols differ from luxury symbols. The essence of the former is "viral transmission," seeking to penetrate social strata quickly and become the greatest common denominator of mass aesthetics; the underlying logic of hard luxury symbols is precisely the opposite.
According to Pierre Bourdieu's classic discussion in "Distinction," taste is never merely personal preference; it classifies and, in turn, classifies those who possess it.
In the context of luxury, top luxury symbols do not seek infinite fusion with mass aesthetics. Instead, through price, channels, scarcity, and aesthetic rules, they create and maintain a recognizable distinction of status.
One key reason Hermès remains strong even during luxury slowdowns is that demand has long exceeded supply. Core products like the Birkin have waiting lists, and the brand relatively avoids aggressive price hikes, maintaining "high perceived value."
Here, waiting, purchase history requirements, and availability control are not sales obstacles but part of the brand's distinction: the act of purchasing itself shapes identity.
Traditional luxury brands dare to make clients wait not just because of longer brand history, but also because their costs are relatively controllable and not easily transparent to consumers.
Whether emphasizing the scarcity of leather, cashmere, or down, their costs are difficult for consumers to precisely benchmark against a publicly available, real-time market price. These brands also have higher gross margins to absorb production, inventory, and channel costs.
But for LAOPU GOLD, as long as "pure gold" remains the core material, consumers can easily strip away the filter and compare its brand premium against the broader market gold price.
Despite its efforts to price independently of gold costs, its peak overall gross margin is only around 40%, far below the 70% typical of traditional luxury businesses.
"Its profit structure dictates that the sales process cannot be too heavy," a fashion industry analyst told media, noting that LAOPU GOLD would find it difficult to sustain the high-cost investments in oversized stores, major launch events, fashion shows, and frequent celebrity endorsements like mature luxury brands.
The high-cost material also makes it difficult to maintain scarcity through production control and waiting lists like mature hard luxury brands. Once store sales slow, high-priced inventory inversely squeezes cash flow, forcing LAOPU to constantly launch new products to open new fronts.
Judging from online channels and official new product information, LAOPU GOLD has noticeably accelerated its new product launch pace this year. Elements like crosses and diamond accents appear more frequently in new products, with some items attempting to incorporate more complex materials and symbolic expressions.
"Since LAOPU GOLD externally emphasizes its luxury positioning, it's difficult to publicly announce price reductions," the analyst stated. However, from an operational perspective, LAOPU is reportedly releasing price space indirectly by increasing discount thresholds and lowering the pricing of new products.
Tmall's flagship store shows that the medium-sized Cross No. 3 diamond pendant (approx. 15.2g gold weight) launched in late May has a calculated per-gram price of 2,594 yuan. The Cross No. 1 diamond pendant medium (approx. 14.0g) has a per-gram price of 2,638 yuan, while the more classic new medium Rose Window No. 1 diamond pendant (approx. 14.0g) reaches a per-gram price of 2,789 yuan.
LAOPU GOLD cannot retreat to the red ocean of ordinary gold shops, nor can it exhibit the calm restraint of mature hard luxury brands during headwinds. It can only continue upward, attempting to reduce consumer sensitivity to per-gram prices through more complex materials and symbols.
Over the next two to three quarters, gross margin, inventory turnover, and operating cash flow will provide a more sober answer to this pressure test for a domestic "hard luxury" brand.
Comments