Old Gold Shop maintains a 21.5% net profit margin, with operating cash flow turning positive for the first time in three years.

With the disclosure of the latest interim report, the market’s concerns about whether gold price fluctuations have dragged down Lao Pu Gold’s sales have an answer: the worst scenario has not occurred yet, but actual performance remains close to the previously forecasted lower limit.

On August 25, Lao Pu Gold announced its performance for the first half of 2026. The company achieved sales of 22.779 billion yuan and revenue of 19.808 billion yuan, up 60.6% and 60.3% year-on-year respectively; adjusted net profit was 4.317 billion yuan, up 83.6% year-on-year.

Previously, the market was concerned that a decline in gold prices would widen the price gap between Lao Pu and traditional gold jewelry, suppress sales, and that slowed sales could create negative operating leverage due to fixed costs and further erode profit margins.

But according to the official interim report, the worst scenario has not happened. Lao Pu Gold’s gross margin for the first half of the year rose from 38.1% last year to 41.3%, and net margin rose from 18.4% to 21.5%.

The company attributes the improvement in profit margins primarily to low-cost inventory, product price increases, and scale effects: inventory reserves made at the end of 2025 had relatively low costs, a round of product price adjustments was completed at the end of February this year, and continued revenue growth helped dilute some fixed expenses.

By the end of June, the company’s inventory increased from 16.044 billion yuan at the end of 2025 to 19.018 billion yuan, an increase of about 2.973 billion yuan; among which, finished goods increased by 5.556 billion yuan to 16.072 billion yuan, while raw materials and semi-finished products decreased. Inventory turnover days rose from 216 to 271.

For Lao Pu Gold, stocking up is part of normal business operations. The company uses a fully self-operated model, and store displays and gold products require considerable inventory, with processing cycles longer than ordinary standardized gold jewelry.

At the end of the reporting period, Lao Pu Gold had only 9.19 million yuan in inventory write-down provisions, not showing clear impairment pressure.

Better-than-expected is that sales collections and profit growth have already exceeded the cash consumed by new inventory, and procurement investment has narrowed relative to business scale.

In the first half, the company’s net operating cash inflow was 2.008 billion yuan, reversing three consecutive years of net outflow from 2023 to 2025.

The improvement in operating cash flow may also be related to a shift in the focus of store expansion this year. By the end of June, the company had 45 self-operated stores, the same as at the end of 2025, covering 35 flagship commercial centers in 16 cities.

The focus for 2026 is not to massively increase store numbers, but to optimize the locations and sizes of 10 to 12 existing stores, six of which have been completed as of the earnings announcement date.

With limited net increase in domestic stores, funding needs for stocking new stores in the second half of the year may decrease compared to 2025, and inventory management will shift more from “stocking for expansion” to increasing sales and turnover efficiency at existing stores.

This also means that Lao Pu Gold’s next stage of growth will need to be borne more by existing stores. Whether current commercial centers can further unlock output becomes increasingly important.

At present, this foundation for growth remains quite strong.

According to Frost & Sullivan, in the first half of 2026, Lao Pu Gold achieved average sales of over 500 million yuan in each of the 35 malls entered, with single store sales and sales per unit area continuing to rank first among global luxury groups.

Overseas is also providing additional growth. Overseas income reached 3.317 billion yuan in the first half, up 107.8% year-on-year, with the proportion of revenue rising from 12.9% to 16.7%, and one new store opened in Macau, China during the period.

Meanwhile, Lao Pu Gold’s consumer group continues to expand. By the end of June, the company disclosed about 730,000 loyal members, up by 120,000 from the end of last year, an increase of nearly 20%.

With the rebound in gold prices, the external price pressure faced by Lao Pu Gold has eased somewhat compared to the second quarter.

International gold prices fell to about $4,000 per ounce in mid-July, then rose again to over $4,600 at the end of August.

The stabilization and rise in gold prices mean that the price gap between Lao Pu and traditional gram-priced gold jewelry is no longer rapidly widening, giving the company more flexibility in pricing, promotions, and restocking.

However, for Lao Pu Gold, the story ahead cannot only revolve around the gold price.

A high-end consumer brand truly needs to establish not just adaptability to a particular gold price trend, but the ability to sustain demand through product differentiation, brand awareness, and pricing power, whether gold prices rise, fall, or fluctuate sharply.

Overseas expansion, improved store efficiency, and growing membership are providing Lao Pu Gold with more such buffering space.

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