Ladies and gentlemen, thank you for standing by, and welcome to Luk Fook Fiscal Year 2024-2025 Annual Results Presentation. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Joanne Ho. Please go ahead, Joanne.
Thank you, Ray. Good morning, everyone. I'm Joanne from the Luk Fook IR team. Thank you for joining us today for our Financial Year 2025 Annual Results. It's truly a pleasure to connect all of you. I need to start with an apology. We have run into an unexpected technical issue with our webcast platform, which is irrelevant to the event. I'm very sorry for that, and thank you for your patience and understanding. Today, I'm joined by Dr. Kathy Chan, Executive Director and CFO of the group, who will walk us through the annual performance. After her presentation, we will open the floor for a Q&A session. This call will be in English, and you can find the presentation materials on our website. I would like to pass the time to Kathy for her presentation.
Thank you, Joanne. Good morning, ladies and gentlemen. Thank you for joining Luk Fook's Financial Year 2024-2025 Annual Results Presentation. I would like to start with looking at our financial highlights, followed by financial review, and then our future plans and strategies. The details will be recorded in the corporate presentation, which has been uploaded to our website this morning. Now, let's look at slide four about the financial highlights first. Despite sustained geopolitical tensions and trade uncertainties clouding the macroeconomic outlook and driving gold prices upward, the group's performance across all regions showed improvements in the second half of Financial Year 2025. Revenue reached HKD 13.3 billion, a 12.9% decrease compared to the same period last year, primarily due to a decline in sales of gold products caused by record-high gold prices during the year.
The surging gold prices resulted in the widening gold hedging losses of HKD 493 million during the year, together with last year's run-off gain of HKD 213 million from the acquisition of 3DG Group for comparison. Please. By 33.3% to HKD 1.4 billion, and the operating profit margin declined to 10.6%. Consequently, the group's profit for the year decreased by 39.3% to HKD 1 billion. When these two factors are excluded, the decline would be reduced to 6.3%. The basic earnings per share decreased by 37.9% to HKD 1.87. Proposed final dividend of HKD 0.55 per share, with annual dividend of HKD 1.1 per share and dividend payout ratio of 59%. There was a net decrease of 296 shops globally, including a net decrease of 312 Luk Fook shops, a net increase of 21 3DG jewelry shops, and a net decrease of five soft brands or productized shops.
Now, the next slide shows the movement in our operating profits. Benefited from the rising gold prices, the group's overall gross margin rose by 5.9% - 33.1%, while gross profit increased by 5.8% to HKD 4.42 billion. Total operating expenses increased by 13.7% to around HKD 2.6 billion. Coupled with the decline in revenue, the ratio of TOE to revenue increased by 4.6%, reaching 19.6%. As mentioned before, the surging gold prices resulted in the widening gold hedging losses of HKD 493 million during the year. In addition, the high base effect was caused by last year's run-off gain of HKD 213 million from the acquisition of 3DG Group. Our operating profit for the year has decreased by 33.3% to HKD 1.4 billion. Now, let's go into the details of our financial performance. Let's go to slide nine now.
Our inventory balance grew to around HKD 10.7 billion at the end of March 2025, while revenue dropped. Therefore, both the average and closing inventory terms base increased by over 110 basis points year on year, reaching a total of over 420 basis points by the end of March 2025. That said, we saw a gradual improvement in inventory terms base in the second half of the financial year as compared to the first, which points to positive momentum moving forward. Our ROE decreased by 5.4% - 8.3%. Let's go to slide 10 now. At the end of March 2025, the group's NAV per share was HKD 22.38, which is 2.2% higher than the same period of last year. Now, let's look at slide 12 for the performance analysis by market. Revenue from Hong Kong, Macau, and overseas markets decreased by 19.6% to HKD 8.07 billion during the year under review.
It accounted for 60.5% of the group's revenue. Investment profit dropped by 7.7% to HKD 1.1 billion, which accounted for 65.3% of the group's total. When excluding gold hedging losses included, investment profit would increase by 7.8% to HKD 1.3 billion, and the adjusted investment profit margin would increase by 4.2% - 16.5%. The retailing business in the Mainland markets showed gradual improvement in the second half of the financial year. As a result, revenue from Mainland markets decreased by 0.2% only to HKD 5.3 billion, accounting for 39.5% of the group's total revenue. Investment profit decreased by 40.7% to HKD 577 million, accounting for 34.7% of the group's total. Due to the reduced contribution of licensing business of a higher settlement profit margin, investment profit margin was 11%. When excluding the gold hedging losses attributed to the Mainland markets, investment profit would be HKD 829 million.
The adjusted investment profit margin decreased by 3.3% hedge funds to 15.7%. Actually, when we looked at our second half performance in all regions, it's actually much better than the first half. In our corporate presentation, you can find the end part, but the panelist part, you can see that we have shown our first half and second half analysis there. If you have interest in looking into more detail about the difference between the first half and second half performance, you can go to the end part of our corporate presentation later on. Now, let's look at slide 13. It shows our revenue and settlement profit by business. Our retailing business was the main source of revenue of the group. The group's retailing revenue decreased by 13.5% to HKD 11 billion, accounting for 82.7% of the group's total revenue.
Investment profit decreased by 17.7% to HKD 1 billion, accounting for 61.6% of the total, and the settlement profit margin was 9.3%. When excluding the gold hedging losses attributed to the retailing business, investment profit would increase by 8.4% to HKD 1.4 billion, and the adjusted settlement profit margin would increase by 2.6% - 12.9%. Due to the continued sluggish demand for diamond products in Mainland and the decrease in the number of licensed shops, the group's wholesaling revenue declined by 8.8% to HKD 1.4 billion, accounting for 10.5% of the group's total revenue. Because of the decrease in revenue and a high sales lease of gold wholesaling with low gross margin, reduced government subsidies and expenses incurred from staff optimization, investment profit decreased to HKD 14 million, accounting for 0.8% of the total, and its settlement profit margin was 1%.
As the settlement profit of wholesaling business included profits from intersettlement sales to self-operated shops, including intersettlement sales in the denominator, the settlement profit margin would be 0.4%. When excluding the gold hedging losses attributed to the wholesaling business, this settlement profit would decrease by 40.7% to HKD 115 million, and the wholesaling settlement profit margin would decrease by 5.5% - 8.2%. Licensing income decreased by 12.6% to HKD 904 million, accounting for 6.8% of the group's total revenue. The settlement profit margin was 69.2%, while the settlement profit decreased by 13.9% to HKD 626 million, accounting for 37.6% of the total. Let's look at the project analysis from slide 14 now. During the year under review, the average international gold price in US dollars per ounce increased nearly 30% year- on- year. The high gold price affected consumer sentiment.
Consequently, sales of gold and platinum products by weight decreased by 15% to HKD 8.8 billion, accounting for 70.9% of the overall sales amount. However, its gross margin increased by 7.1% - 26.4% because of the rising gold prices. Gross profit of gold and platinum products therefore increased by 15.2% to HKD 2.3 billion, accounting for 62% of the overall gross profits. On the other hand, the decline in sales of fixed price jewelry products narrowed significantly in the second half of financial year 2025 as compared to the first half. Therefore, for the full year, sales of fixed price jewelry products only dropped by 7.6% to HKD 3.6 billion, accounting for 29.1% of the overall sales amount. Nevertheless, because of the increased mix of retailing revenue, which has higher gross margin than wholesaling, gross margin of fixed price jewelry products increased by 3% - 39.4%.
Its gross profit remained flat at HKD 1.4 billion, accounting for 58% of the overall gross profits. Now, let's look at slide 16 for our performance in Hong Kong, Macau, and overseas markets. Retailing revenue from the Hong Kong, Macau, and overseas markets decreased by 20.4% to HKD 7.9 billion, accounting for 97.6% of these markets' total and 59% of the group's total revenue. Its settlement profit decreased by 7.9% to HKD 969 million, accounting for 89% of these markets' total and 58.2% of the group's total, with a settlement profit margin of 12.3%. When excluding the gold hedging losses attributed to the Hong Kong, Macau, and overseas markets, the settlement profit would increase by 4.6% to HKD 1.1 billion, and the adjusted settlement profit margin would increase by 3.5 percentage points to 14.5%.
In addition, due to the addition of four overseas licensed shops during the year, the wholesaling revenue increased by 35.6% to HKD 147 million, accounting for 1.8% of the Hong Kong, Macau, and overseas markets total revenue and 1.1% of the group's total. Its settlement profit was HKD 17 million, accounting for 6.4% of these markets total and 4.2% of the group's total. Its settlement profit margin was 47%. As the settlement profit of the wholesaling business included the profit on intersettlement sales to self-operated shops, with including intersettlement sales in the denominator, its settlement profit margin would be 3.2%. When excluding gold hedging losses borne by the wholesaling business, this settlement profit would increase by 44% to HKD 139 million, and the adjusted wholesaling business profit margin would increase by 5.4% - 94%.
Apart from that, Hong Kong, Macau, and overseas markets licensing income increased by 9% to HKD 15 million because of the increase in number of licensed shops overseas, and this accounts for 0.6% of these markets total and 0.4% of the group's total. The settlement profit increased by 8.6% to HKD 15 million, accounting for 4.6% of these markets total and 3% of the group's total. Its settlement profit margin was 1.6%. Now, let's look at slide 17 for performance in the Mainland markets. The retailing revenue in Mainland increased by 10.4% to HKD 3.1 billion, accounting for 59.9% of Mainland markets total and 23.7% of group's total. Its settlement profit was HKD 57 million, accounting for 9.9% of Mainland markets total and 3.4% of the group's total. Its settlement profit margin was 1.8%.
When excluding the gold hedging losses attributed to the retailing business here, the settlement profit would increase by 27.8% to HKD 277 million, and the adjusted settlement profit margin would increase by 1.2% - 8.8%. Although demand for diamond products in the Mainland market remains sluggish, the launch of new collections of fixed-price gold products during the year has significantly narrowed the decline in wholesaling revenue to -12.2% to HKD 1.2 billion, and accounted for 23.9% of Mainland markets revenue and 9.4% of the group's total. Because of the decrease in revenue and a high sales mix of gold wholesaling with lower gross margin, a decrease in the government subsidies and expenses incurred from workforce optimization, the settlement turned from profit to loss of HKD 55 million, accounting for -0.5% of Mainland markets total and -3.3% of group's total. Its settlement profit margin decreased to -4.4%.
As the settlement profit of wholesaling businesses included the profit of intersettlement sales to self-operated shops, with including intersettlement sales in the denominator, its settlement profit margin would be -4% instead. When excluding gold hedging losses attributed to the wholesaling business, this settlement loss would decrease to HKD 23 million, and the adjusted wholesaling settlement profit margin would decrease by 9.9% to -1.9%. I want to emphasize that the reason why we want to look at the excluding gold hedging losses position is mainly because, actually, the gold hedging losses would need to be recorded fully in our account by end of the year. We know that actually, by March and, or end after, by end part of March to Friday, actually, the gold price increased a lot. That is one of the reasons why our gold hedging losses become so high.
For the inventory, actually, we can't record the rising gold prices, because of the prudence concept. That is quite an unequal accounting treatment in terms of gold price rises in inventory and the hedging positions. That is why, if we look at the position excluding the hedging losses, it would be a more, kind of a clearer picture of the real performance. Our licensing income in the Mainland markets decreased by 13.6% to HKD 854 million, which accounted for 16.2% of Mainland markets revenue and 6.4% of the group's total. Its settlement profit decreased by 14.5% to HKD 575 million, accounting for 99.6% of Mainland markets total and 34.5% of the group's total. Its settlement profit margin was 67.4%. Now let's look at slide 20, about our e-commerce business in Mainland.
Its revenue remained flat at HKD 1.84 billion, accounting for 58% of the retailing revenue in Mainland and 16.7% of the group's retailing revenue, with ASP increased by 22.2% to HKD 2,200. Now let's move on to the next slide and take a look at the performance of our self-operated shops. Given the high base effect of wholesale sales, the group was negative 25%. The same store sales of Hong Kong and Macau markets was negative 12% and negative 28% and negative 12% for the Mainland markets. The group's single sales for gold and platinum products was negative 28% and negative 14% for fixed-price jewelry products. Now let's go to slide 24 for average ticket size. The average ticket size in Hong Kong, Macau, and Mainland all increased by 8%-16%. The average selling price of overall fixed-price jewelry products showed improvement across Hong Kong, Macau, and the Maiinland.
Notably, both the Macau and Mainland markets saw a 20% increase. Let's look at slide 26. Our total operating expenses increased by 13.7% to HKD 2.6 billion, representing 19.6% of revenue. Their QE to revenue ratio increased by 4.6% as compared to the same period last year, mainly attributable to the decrease in revenue. We have 18 renewals out of 17 shops in FY2025, with a slight overall, a small percentage of a 4.6% overall renewal increment. I'm sorry, a flat overall renewal increment, and the total rental expenses actually is 4.6% above last year's level. It's a very minor increase, overall speaking. We have 28 shops subject to renewal in FY2026, and it's around 40% of the total. The increment rate is expected to be lower than financial year 2025. Now let's look at slide 28 for the CapEx.
We do not have any significant CapEx in FY2025, and we do not expect any significant one in FY2026 as well. Now let's look at the group's future plans and strategies. The group has set up its new three-year corporate strategy starting from financial year 2026 with overseas market expansion, market-oriented products, and operational efficiency enhancement as its three main focuses so as to foster its future business growth. On slide 31, you can see that, as we saw significant growth potential in the overseas markets, we will continue to allocate more resources to expand its footprint across the world. Currently, the group's footprint spans 11 countries and regions, with a goal to enter three more countries and establish 50 new overseas shops within the next three years. In addition, the group is committed to developing its e-commerce business and strengthening cooperation with various e-commerce platforms overseas.
At the same time, it will also optimize its own e-commerce platforms and need to sustain the growth in e-commerce revenue. In light of the enormous spending potential of young consumers on online sales platforms, the group will continue its endeavors to promote the sales of affordable luxury jewelry products to expand its global footprint in the young consumer markets. Let's look at slide 32. It shows our network expansion plan and CapEx budget for FY2026. We remain cautiously optimistic about its medium to long-term business prospects in Mainland and will continue to expand in Mainland markets in the future. Therefore, the group targets to net at 50 shops for the Mainland market in financial year 2026. Apart from that, the group's optimistic about the immense growth potential in the overseas markets, as mentioned before.
Therefore, we will allocate more resources for expansion and plans to have that net addition of approximately 20 shops in the overseas market in the financial year 2026. Furthermore, the group also aims to net add two shops in the Macau market. The CapEx budget for FY2026 is expected to be around HKD 100 million, mainly for the value shop renovation. Now let's look at slide 37. It is talking about second, focus, strategy focus is on the market-oriented products. In response to the trend of polarized consumption, we are extending our focus to both premium and affordable luxury segments. Through in-depth analysis of consumer needs, the group continues to optimize its product mix, launch concept stores, and enhance product indoor and in-store merchandising. Furthermore, the group leverages market data to drive product innovation.
The group continues to promote its product differentiation strategy by delivering brand stories and values, combining its unique design with craftsmanship innovation, providing personalized customization services, launching IP collaboration projects, and ensuring quality assurance and enhancing its market competitiveness. Additionally, even efficient product management enables the group to effectively coordinate sales and marketing and strengthen supply of selling products, thereby fully capitalizing on sales opportunities to boost sales volume. On the other hand, the group enhances inventory efficiency by precisely managing product structure and flexibly adjusting the product portfolio in response to market demands based on data-driven product management strategies. Last but not least, slide 38 shows our sixth strategy, operational efficiency enhancement. The group will promote its productivity by optimizing its supply chain management, implementing full automation, big data management, and data analytics, as well as the application of artificial intelligence technology.
At the same time, cross-departmental collaboration and agile product management will further help to enhance collaborative efficiency among teams, ensuring companies remain competitive in a rapidly changing market. The group will also strive to maximize onshore use productivity by cultivating cultures of continuous improvement and innovation, nurturing strategic thinking and proactive attitudes, optimizing its training programs and refining its performance management system. Now let's shift to the group's branding and promotions. We have integrated strategies to attract target customers and aim to foster higher consumer or customer loyalty. On slide 40, you can see that we have invited famous actors and attendees as the global brand ambassador to rejuvenate the brand image, making it more appealing to the new generation. Next slide, you can see that we transformed various product lines into independent stores and adopted multi-brand strategy to reach different target markets.
We also introduced different shop images to rejuvenate the brand. Slide 40 shows that Luk Fook Jewelry has collaborated with Hong Kong's beauty pageant Miss Hong Kong for the 23rd year as the official sponsor of the crown and launched a series of jewelry products. Let's look at slide 43. We raised the recognition of the traditional Chinese form buckle of the brand name, which is distinct to Hong Kong brand, via different promotion channels and materials. We also incorporated Hong Kong's beautiful street scenes and nostalgic Hong Kong style decor into the store designs in order to promote Hong Kong culture.
On slide 44, as a new Chinese style has gained popularity among Generation Z in recent years, we have blended expressive traditional Chinese elements with modern aesthetic to create collections, including the Tang Dynasty style, charm of Song Dynasty, and gold standard of Dunhuang, coupled with roadshows into new Chinese ambiance and the slogan of "Get Wu at Luk Fook." We have successfully seized the market opportunity arising from this trend. On the next slide, we invited two famous actors to lead the ambassadors of the anniversary campaign and kickstarted a series of promotions with reach and overall exposure of 1 billion views. We have successfully launched our new Dive Link collection through several key initiatives, Bing Zhan, Bing Zhan, and Xie Lian. On slide 46, we hosted our first ever jewelry show at Harbin Ice and Snow World, drawing visitors from across the country.
We also ran the Eye Shine for Dive Link campaign with our management and shop representatives showcasing the collection. Plus, we teamed up with Trip.com for the lucky draw that racked up 218 million total views. On slide 47, we invited renowned actress Ms. Kelly Jiang to officiate the opening ceremony at the Luk Fook Jewelry Race Day, where she, along with six females and finalists from Hong Kong, showcased our new Dive Link Shimmering Gold collection. The promotion across four top platforms generated over 400 million views. On slide 48, we launched a series of promotions to celebrate the year of snake by collaborating with the rep to launch the Fashion Gold campaign. We also invited young celebrity Yu Chen as the campaign spokesman to feature new products in creative ways.
On slide 49, we invited a variety of celebrities for short to long-term marketing campaigns to raise brand awareness and recognition among our target customers of different brands and product collections. Slide 50 shows out some of our VIP figures. Our membership base increased nearly 23% to reach over 4.9 million in FY2025, with members contributing 55% of the total retail sales. We consolidate all subscription brand memberships into the Luk Fook Jewelry membership program. Members need only a single VIP account to accumulate points and enjoy a wide range of exclusive references across all brands and the Luk Fook group. We also held nearly 12,000 VIP workshops during the year. Slide 51, we co-organized promotional activities with various reputable partners to expand our brand exposure to target customers.
Next slide, we co-organized the 500 Wu Ling, the Love Song, a pop-up store with Platinum Guild International and an academic exchange event with Xi Nan, a university model of pearl inlaid craftsmanship, which is one of the intangible cultural heritages. Effective sustainability governance is a crucial factor in driving long-term success of the group. Therefore, we are committed to integrating ESG principles into our corporate planning and operation decision-making process. We are honored to have received 40 awards in FY2025. The increase in central bank store reserves and escalating worldwide geopolitical tensions has driven gold prices to rise continuously. Although this spike in gold prices may affect sales performance, an increase in profit margin will help mitigate the impact of the decline in sales. Sales of the gold products are expected to resume to the normal levels after consumers adapt to the high gold prices.
Furthermore, with the flourishing development of jewelry craftsmanship, the group will actively promote fixed-price gold products and fixed-price diamond-set pure gold products to replace diamond-set 18-karat gold products. With effective branding and product differentiation strategies, the overall single sales of the group from 1st April t o 21st June , 2025, has further improved. Single sales in the Mainland market saw nearly 20% growth, while the Hong Kong and Macau market remained relatively flat. With the ongoing optimization of fixed-price jewelry product mix and improving Mainland markets, the group's business performance may improve in the Mainland and the remaining months of FY2026.
Given the overall support of the group, 3DG Group has demonstrated strong business growth and significant improvement on operation in 2025, with revenue amounting to HKD 712 million for the nine months ended to ended 31st March 2025, representing an increase of nearly 20% over the 12 months ended 31st March 2024. The reason why nine months against 12 months is mainly because they changed the year and date from June to March. So they have nine months only in the financial year 2025. The group's profit margin increased 7% - 35%. Excluding the impact of gold hedging losses, its retailing, licensing, and e-commerce business and overall business in Mainland all recorded a turnaround to profits. Besides the single sales of these Mainland markets, we recorded a nearly 20% growth from 1st April to 21st June 2025 as well.
It is believed that with all continuous optimization in various aspects, 3DG Group will become an important driver for the group's growth. This concludes my presentation. Thank you.
Thank you.
All right. Ladies and gentlemen, please open the survey session.
Thank you. Ladies and gentlemen, if you do wish to ask an audio question, please press star one on the telephone keypad. If you wish to withdraw a question, you may do so by pressing star two. Again, please press star one to register for a question. Our first question comes from the line of Mavis Hui from DBS. Please go ahead.
Thank you. Hi, Kathy and Joanne. Thank you very much for the presentation this morning. Thank you. I've got three questions for you. It seems that we have seen very good recovery in the sales momentum for Mainland China during April to June this year.
Can we elaborate more in terms of the main drivers, please, such as new products, new categories, or maybe a low base, for example? What could be the hurdle for Hong Kong and Macau to see a similar sales rebound, especially given actually Hong Kong and Macau has an even lower base for year-on-year improvement? Thank you.
Okay. Now, you spoke I think you have two questions only, right? Not three, right?
Actually, I have more than that.
Okay, okay. Okay. Let's talk about the Mainland market's performance in the April to June this year. In fact, actually, we've seen a very strong rebound or strong performance in the fixed-price gold jewelry products, especially because we've got a new collection actually released in, I think, around November 2024. Its performance was very good, and up to now, it's still selling very well.
Normally, when we launch something new, the self-operating arm will be more sensitive. Normally, the self-operating arm would do better first, and then it would expand to the licensing shops. Basically, because of the few months of launching, after a few months of launching of this new collection, we try to promote very actively to the licensed shops. They try to buy more too. That is why we have very good performance up to now for this new collection. We have got the kind of a patent; the suppliers have applied for the patent rights for this one. They have given us the exclusive rights for the sale as well. It is kind of a unique product in the market at the moment. Besides that, we have a new ambassador, Chen Yi.
I think he helped us a lot as well in terms of promoting the sales because he's got a lot of fans, and it helped a lot in selling the products or promoting our products, especially when we announced his ambassadorship. Actually, we have launched five products at the same time when we announced our new spokesmanship. That five products actually sold out in 17 minutes. It's a very impressive performance, actually. Of course, we've got other new collections as well, like the new Chinese kind of new Shenzhong. Those different products are selling quite well too. That's why he's helped a lot in the performance of our fixed-price gold jewelry. Apart from that, actually, we have started to put in some diamond in the pure gold too.
That's why it looks very, very good. It's quite well received by the market too. All these factors, I think it's mostly in the product side. We talk about kind of a market-oriented product focus. I think we have done that quite successfully, and it's very helpful in improving our performance in the early parts of this financial year. For the Hong Kong and Macau markets, because the kind of economic conditions here in these two markets are not too good, although we can see the rise in Mainland physicists' number, actually, their per capita spending actually dropped quite a bit. That's why it's kind of a struggling. Actually, we can see improvement already. At least we start to see kind of a flat-ish position against the kind of drop in the first half. Basically, I think it's improving.
Hopefully, we will see a kind of a rebound again in the coming months in Hong Kong and Macau markets.
That's great. Thanks. Actually, Kathy, that was my first question. My second question is that on slide 24, we were seeing a falling ASP for non-gold fixed-price products. Overall, fixed-price jewelries are actually still sustaining supportive ASP trends. Could we have a better idea in terms of ASP trend of fixed-price gold products? Would we expect such ASP be on an uptrend going forward? Besides, what's the expected contribution from fixed-price gold jewelries in terms of total revenue for this current financial year, FY2026? Thank you.
In fact, when we looked at the fixed-price gold products, its contribution to the overall revenue of, I mean, the retailing revenue within the fixed-price jewelry sector actually increased from 33% - 54% in financial year 2025.
Increased a lot, actually. It's kind of a doubling of its sales mix within their portfolio. Basically, that's why it's a very strong performance. When we looked at the kind of ASP drop for the fixed-price jewelry, it's mainly including the kind of diamond, I mean, in slide 24, diamond, jade, and then colored stones and pearl products. It's kind of a higher value type of product. For that part, it's not that, I mean, the kind of sales of this part was quite sluggish. That's the reason why it's kind of a trading down phenomenon there. That's why we consider it's dropping in terms of ASPs. For the fixed-price gold products, in fact, when we looked at the kind of high ASP, part of the reason will be mainly because of the rise in gold price.
Basically, it would have some relationship with the gold price fluctuation in terms of the variance, I mean, the increase or decrease in ASP. Basically, of course, we are now trying to offer more kind of a higher weight, I mean, kind of a high-weight fixed-price gold products or kind of higher prices fixed-price gold products as well because there is kind of a polarization in terms of consumption in the market. We are trying to offer more high-value products into the market as well as kind of affordable luxury products as well. Hopefully, there may be kind of an increase in ASP. Now, actually, we have given the frontline KPI for selling the high-value items as well.
Right. Thank you, Kathy.
My last question is that can you give us overall guidance in terms of things for sales growth by markets and also gross margin, EBITDA margins? Besides, what's our plan for gold hedging policy? Because it was 20%. As there is an upside in gold price, probably as per market expectations, do we still keep this kind of level or would we minimize gold hedging ratio? Thank you.
In fact, when we talk about the gold hedging ratio, we are quite a stable one, really. We do not adjust that too much. Normally, in the past, we have 20%-25%. This year, we got something like 27% because of 3DG Group. We try a higher hedging ratio for them in order to reduce their interest expenses because gold loan will be much cheaper than other corporate loans.
That's why we have a bit of increase in our overall hedging ratio from around 20-something to below 25 to now kind of 27%. Basically, I think we don't intend to change that too much because gold price will, and actually, there's kind of a view from various experts that the gold price may drop sometimes later. Basically, I guess it may be better for us to keep a low, keep a stable hedging ratio because actually, if you don't have a view, we should hedge 50%. We have a view that in long-term, gold price would rise, I mean, long, long-term. That's why our hedging ratio will be much lower than the other competitors normally.
When we talk about the targets, things for sales targets, we do not have a very specific one, but we are all, I guess, in this financial year 2026, we should expect something like a double-digit growth in terms of things for sales across all regions.
Thank you. What about profitability? What about gross margin or EBITDA margin?
Because of the time, I think some of the investors also have the questions.
Okay.
Maybe you can read out later on. Sorry. I am sorry.
Thank you.
Okay
Thank you.
Thank you. Our next question comes from the line of Tiffany Feng f rom Citi. Please go ahead.
Hi, good morning, Kathy. And Joanne, thanks for taking my question. I just want to follow up, first of all, on the fixed-price gold, more details about this product line. Do you have a sales target for FY2026?
What is the ASP and GP margin for this product? Also, for the sales of the fixed-price gold at your franchising stores, is it in the wholesale revenue or licensing revenue? This is my first question. My second question is for the same store sales growth for your franchising stores. Is it similar to your self-operated stores? What is the outlook for the full year? Thank you.
If talking about fixed-price gold products, actually, we should expect that the sales mix of that to improve further. It is now already contributing more than half of the fixed-price jewelry products. I think we should expect that to increase further. It is hard to quantify that. When comparing against prior years, it is from 33% - 54% already.
Maybe there may be kind of a chance to have a double-digit, maybe 10 percentage point more. It's not too sure, but maybe it would happen like that. The ASP of that would be because it's now getting kind of a high mix there. You may see that the ASPs should be something similar to what we have in the slides. Let me see which slides. Fixed-price jewelry. In slide 24, it's around like it should be something quite similar to the overall fixed-price jewelry area because it has kind of a high mix there. We looked at slide 24, it's something like HKD 6,500 in Macau, and then Hong Kong, HKD 5,100, and Mainland China, HKD 2,500. The average should be around that kind of level. The gross margin of fixed-price gold products will be quite similar to fixed-price jewelry overall speaking, just like diamond.
Basically, if you go back to slide 25, let me see. Slide 24, no, 14. For the fixed-price jewelry, gross margins are around 39% on average for the group as a whole. For fixed-price jewelry sales in the licensed shops, actually, it's because the shops are not our shops. We can't count that as retailing revenue. We only count the wholesaling revenue and the licensing income for those fixed-price gold products they purchase. I can't get to your last question about the self-operating shops and licensed shops. Which aspect are you talking about, ma'am?
I'm just asking whether the franchising stores' same-store sales growth performance is similar to your self-operated stores, or there's a difference. What is the outlook?
Actually, quite similar. On slide 22, you can see that we've got the comparison.
Like licensed shops, I mean, in FY2025, the overall same-store sales was -10%, while self-operated shops, -12% in Mainland. They have similar performance, but licensed shops would be normally a little bit better than self-operated shops because they normally occupy very good locations.
What about quarter-to-date? That means April to June, still better than the self-operated stores?
Yes. Yes. Licensed shops perform better. It is over 20% growth.
May I double-confirm the fixed-price gold sales at your franchising stores? You book both wholesale revenue and licensing revenue?
Yeah, because we sell the products sold by us to them directly with book wholesaling revenue. If they purchase from our offline suppliers, it will not be in our wholesaling revenue. For the licensing income, no matter they buy from us or buy from other suppliers, we would charge them licensing income.
What is the mix here? Buy from you directly and buy from your suppliers?
Like the exclusive one, like the Bing Zhuan series. For that part, for the exclusive part, they need to buy from us. For other types of fixed-price products, they need to buy from suppliers.
Right now, many of those are light-weighted products, right? Because the ASPs are still very low. Sorry? Right now what? Still the light-weight product because I see the ASP is just HKD 2,000.
Yes. Yes. That is why we plan to launch high-weight products going forward. More high-weight products going forward.
Okay. Great. Thank you. Very clear. Thank you, Kathy.
Thank you.
Because of the time here, it will be the last question of today. Thank you.
Our last question comes from the line of Anne Ling from Jefferies. Please go ahead.
Thank you. Hi, Kathy.
It's Anne here from Jefferies. Just very small questions. Most of the questions have been asked. First, just want to clarify. You just mentioned so for the nearly 20% increase in same-store sales, that's mainly for your this is basically for our self-operated store, correct? Then for the licensed, this is what Tiffany mentioned, is more than 20% same-store. Just want to clarify this.
Oh, no. Actually, the 20% is talking about overall single sales for including licensed shops and self-operated shops. Actually, for licensed shops, it's nearly 20%, not above 20%.
Okay. Got it. Got it. Good. My second question is from how often do you raise the price for your fixed-price gold product? For example, last year, how many times have you raised it? This year, what is your plan?
Do you have any normal schedule for your fixed-price gold so as to protect your margin, right? Yeah.
Oh, in fact, we don't set a static kind of period for adjusting our prices. Actually, it all depends on the gold price fluctuation. Normally, we set a kind of a percentage variance. If it exceeds that percentage, then we'll adjust. It's kind of not adjusting everything. It depends on which type of product is exceeding that kind of threshold and would adjust. It depends.
Yeah. Okay. When was the last time you adjusted your fixed-price product in a bigger manner?
I guess it's something like maybe last month or last one or two months.
Okay. Okay. How much did you increase?
It's kind of a normally, if it's above a certain percentage, it should be something like kind of a change in 5% or more than 5% or 8%, we would start to adjust.
Okay. Got it.
Not all products.
Got it. Got it. My final questions. For your store opening, about 50 net store openings for year 2026, right, fiscal year for mMainland China, are you, where is this growth coming out from? By geography, where are these new stores being located in terms of region or by city tier? Also, secondly, do you think you are actually getting some franchisees, for example, from other franchisees, from other brands going to your store? Yeah, that's my final question. Thank you. Okay.
Now, actually, for the net addition expected in the Mainland, in the first half, we should still expect a drop overall in the net addition because we can still see kind of a closure, especially in the licensed shops area. We should not expect to have a net addition in the first half. In the second half, we should start to see kind of a net addition coming back. For those net addition, mostly, it would be 3DG brand. 3DG brand. Because it's still small in terms of scale within Mainland, we won't focus in very certain areas. It's kind of widespread, but most likely, maybe we will start from the first-tier cities and the fourth and fifth-tier cities, kind of a polarization note. We start from the high-end one and the low-end one.
Right.
Got it. Thank you very much, Kathy. Thank you. And thank you, Joanne.
Thank you, Kathy. We come to the end of our conference. Thank you all for joining us today. If you need an audio replay or any assistance, please email us at ir@lufeng.com. We hope you have a nice day. Goodbye.
Thank you. Goodbye.
Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect.