Fashion jewelry brand Guangdong Chj Industry Co., Ltd. (002345.SZ) reported revenue of 6.237 billion yuan in the first three quarters, up 28.35% year-on-year, while net profit attributable to shareholders rose marginally by 0.33% to 317 million yuan. The third quarter saw revenue surge 49.52% to 2.135 billion yuan, but a goodwill impairment of 170 million yuan for its subsidiary brand FION led to a net loss of 14.28 million yuan, down 116.52% year-on-year.
Excluding the impairment, the company achieved double-digit growth in Q3, driven by its core jewelry business. To capture younger consumers, Guangdong Chj has introduced strategies like lightweight gold products, fixed-price gold items, and IP collaborations. However, concerns persist over pricing transparency and value retention of fixed-price products, while rapid franchise expansion risks diluting brand equity and profitability.
The company views overseas markets as a new growth driver, with its Hong Kong IPO partly funding international store expansion. However, overseas revenue currently accounts for less than 1% of total sales. Competing against established players like Chow Tai Fook, Guangdong Chj faces challenges in building brand recognition abroad.
**1. Lingering Goodwill Risks and Volatile Profits** Profitability has been unstable, with net profit growth swinging from -43.22% in 2022 to 67.41% in 2023, then -41.91% in 2024, and 0.33% in the first three quarters of this year. Goodwill impairments—totaling 466 million yuan over four years—stem largely from the 2014 acquisition of handbag brand FION, which carried 1.163 billion yuan in goodwill. Despite recent brand revitalization efforts, FION’s remaining 334 million yuan goodwill remains a potential drag.
Meanwhile, Guangdong Chj’s core jewelry sales fell 7.59% in 2024 amid weak gold jewelry demand. The company is countering this with product innovation (e.g., heritage-inspired designs and new IP collaborations) and aggressive franchise expansion. However, high-premium gold products, while boosting revenue, risk customer backlash if perceived value falls short of pricing.
**2. Seven-Quarter Slide in Gross Margin** Franchise stores now drive over half of revenue (54.7% in H1 2024), up from 21% in 2019. But their focus on lower-margin gold products has dragged the channel’s gross margin down from 22.6% in 2022 to 16.6% in 2024, below self-operated and online channels. Overall gross margin has declined for seven consecutive quarters to 23.16%.
The company plans to open 20 overseas self-operated stores by 2028, but its asset-heavy model faces long payback periods and stiff competition in untested markets. With minimal global brand awareness, Guangdong Chj’s overseas ambitions remain uncertain.
Comments