HONG KONG (Reuters) – Chow Tai Fook Jewellery Group Ltd, China’s largest jeweller by market value, reported a 36.6% drop in annual profit as COVID-19 and a surge in international gold prices dampened retail demand, but said it will continue to expand in China.

“Despite the recent headwinds, we remain optimistic about the mid-to long-term prospects of the jewellery market in Mainland China,” Chairman Henry Cheng said in an earnings statement on Thursday to the Hong Kong Stock Exchange.

At the same time, Chow Tai Fook will also consolidate its retail network and reduce costs, closing 10-15 stores in Hong Kong and Macau.

“In Hong Kong and Macau, the market will remain challenging in the foreseeable future,” Cheng said.

In mainland China, the company plans to expand using the franchise model, aiming to open 400-450 more points of sales by the end March 2021, the company said in conference call.

Chow Tai Fook’s retail strength expanded to 3,850 points of sale in the year ended on March 31, 2020, including in China, Hong Kong and Macau, compared with 3,134 points the end of the previous fiscal year.

The company’s net profit plunged to HK$2.9 billion ($374 million) from HK$4.58 billion the year before, marking its worst annual performance since 2010.

That fell short of the HK$3.67 billion forecast by analysts, Refinitiv SmartEstimate data showed.

Revenue for the year fell 14.9% to HK$56.75 billion from HK$66.66 billion. Same-store sales in Hong Kong and Macau fell by 38.7% and by 15.1% in mainland China.

Shares of Chow Tai Fook slid 0.9% on Thursday prior to the results statement, outperforming a 2.3% fall in the benchmark Hang Seng index.

($1 = 7.7505 Hong Kong dollars)

(Reporting by Donny Kwok and Twinnie Siu; Editing by Jason Neely and Tom Hogue)