Editor’s Note
This article examines the volatile profitability of CHJ, highlighting how significant goodwill impairments have been a primary driver of its fluctuating net profit in recent reporting periods.
The profitability of CHJ in recent years has been unstable. From 2022 to 2024 and the first three quarters of this year, the year-on-year growth rates of its net profit attributable to shareholders were -43.22%, 67.41%, -41.91%, and 0.33%, respectively. Securities Star noted that goodwill impairment has been a key variable affecting profitability across reporting periods. For the aforementioned periods, the company’s goodwill impairments were 80.7 million yuan, 39.4 million yuan, 177 million yuan, and 170 million yuan, respectively. The cumulative goodwill impairment over the past four years amounts to a staggering 466 million yuan. This is primarily due to the high goodwill risk buried by the company’s high-premium acquisition of the handbag brand Fion in 2014.
In 2014, CHJ completed the acquisition of the handbag brand “FION Fion,” resulting in goodwill as high as 1.163 billion yuan. However, the performance of the Fion brand has consistently fallen short of expectations, forcing the company to make annual goodwill impairment provisions. Regarding the reason for the large goodwill impairment provision in the third quarter of this year, CHJ attributed it to the uncertainty in the domestic and international consumption environment in 2025, which is expected to impact Fion’s performance.
After the aforementioned provision, the book value of goodwill formed from the acquisition of Fion remains as high as 334 million yuan. Although the company stated that Fion’s brand upgrade and rejuvenation efforts have shown initial results in recent years, any future operational fluctuations or macroeconomic headwinds for Fion could trigger a new round of impairment losses.
In contrast, CHJ’s jewelry business appears more stable. However, in 2024, a year of overall sluggish gold and jewelry consumption, sales volume for this core business still fell by 7.59% year-on-year. In response, the company is intensifying efforts to enhance product strength while expanding its franchise store footprint against the trend.
Securities Star learned that the company focuses on four differentiated categories—”Intangible Cultural Heritage,” “Beading,” “Ancient Craftsmanship High Workmanship,” and “Popular IP”—to build a youthful jewelry brand. For example, in the third quarter of this year, the company iterated its “Intangible Cultural Heritage Filigree” brand imprint series and added two new IP licensing series in the IP field: Butter Bear and Mofusand.
Furthermore, at the product strategy level, CHJ launched a “Small Weight Gold” strategy in 2023, along with high-workmanship, high-value-added gold products and fixed-price gold products. This set of high-premium product combinations has, to some extent, driven up the revenue from the company’s traditional gold products. However, while the pricing logic of high workmanship fees and fixed prices can increase the gross profit margin per item, if the actual value of the product does not strongly match the high premium, it can easily trigger a customer trust crisis. The aforementioned risks have already surfaced on the consumer side. Securities Star reviewed the Black Cat Complaint platform and found that some consumers reported quality-related issues with CHJ jewelry products they purchased. If such consumer demands are not handled properly, they can easily damage the company’s brand reputation.
Expanding franchise stores against the trend has become a key engine for CHJ to maintain revenue growth. For instance, in 2024, a year of overall sluggish gold and jewelry consumption, the company’s revenue managed to achieve double-digit growth, largely thanks to rapid inventory placement through franchise channels. That year, CHJ net opened 147 stores. As of the end of the third quarter this year, the company’s franchise stores reached 1,412, with a net increase of 72 stores in the third quarter alone.
With the continuous expansion of the franchise channel, the proportion of CHJ’s revenue from franchising increased from 21% in 2019 to 50.4% in 2024, reaching 54.7% in the first half of this year.
However, this “scale-for-growth” model has struggled to translate effectively into profitability.
Securities Star learned that fashion jewelry was once the company’s main product. As this business experienced sluggish growth in recent years, coupled with the rise of gold’s safe-haven attributes and “Guochao” (national trend) consumption, market demand has been strong. The company’s business focus has gradually shifted to the gold track, and among the products sold in its franchise stores, gold products account for a higher proportion. This situation aligns with the core logic of the franchise model—”penetrating lower-tier markets and pushing volume through inventory placement.” Expanding market share through the volume sales of gold products fits the consumption characteristics of lower-tier markets.
However, traditional gold products have weaker pricing power. From 2022 to 2024, the gross profit margin of CHJ’s classic gold jewelry never exceeded 10%. Even in the first half of this year, benefiting from rising gold prices, the gross margin for this product increased to 11.8%, still far below the 26.8% level for fashion jewelry in the same period.
As the proportion of lower-margin gold products increased within the franchise system, the overall gross margin of this channel was directly dragged down, falling from 22.6% in 2022 to 16.6% in 2024, and remaining at 16.6% in the first half of this year, lower than the self-operated and online channels during the same period. As of the first three quarters of this year, the company’s gross profit margin was 23.16%, marking a year-on-year decline for seven consecutive quarters.
Some viewpoints suggest that by expanding its franchise channels, the company is solidifying its presence in mature regions while further developing growth regions and untapped markets by seeking important partners and supporting key franchisees. Securities Star learned that, in addition to continuing its “land grab” in the domestic market, CHJ has initiated overseas market expansion since last year. Part of the funds raised from its recent Hong Kong IPO will be invested in expanding overseas stores. The company plans to open 20 self-operated stores overseas by the end of 2028.
As of the first half of this year, the company’s overseas revenue accounted for less than 1%. Starting from virtually zero brand international recognition, the company must directly compete with giants like Chow Tai Fook, which have already established a deep presence in overseas markets. Simultaneously, the capital-intensive self-operated model it adopts will face severe challenges in unfamiliar markets, including long payback periods and high operational risks.
