Laopu Gold ultimately failed to secure the premium enjoyed by luxury brands.

Laopu Gold has been one of the most compelling storytellers in the capital markets over the past year.

Traditional gold retailers such as Chow Tai Fook essentially earn slim processing fees. While they appear to operate brand-focused businesses, their valuations are effectively benchmarked against the manufacturing sector at 10x PE. Through a comprehensive luxury narrative system, Laopu Gold at one point aligned its valuation with top global luxury groups like Richemont and Hermès, reaching a peak PE (TTM) of 160x.

This luxury narrative framework is primarily built by emulating two core characteristics of luxury goods: pricing power and value retention.

On pricing power: Most traditional gold brands adopt a pricing model anchored to the gold price. However, through innovative ancient craftsmanship and deliberate scarcity creation, Laopu Gold has decoupled its product pricing from gold price fluctuations, implementing a uniform "fixed price" system. This facilitates its transition from "earning processing fees" to "capturing brand premium".

On value retention: Having established basic pricing power, Laopu Gold needed to endow its products with value-preserving attributes similar to luxury goods. To this end, from 2024 to the present, Laopu Gold has adjusted its prices 6 times in total, with a cumulative increase of 118%.

While this narrative once helped Laopu Gold reshape its valuation, a correction soon followed. Over the past year, its share price has fallen by 60% from its all-time high.

The capital market correction stems from the realization that while Laopu Gold has superficially achieved luxury-like traits of "strong pricing and high value retention" through operational tactics, the underlying logic behind this differs significantly from genuine luxury brands.

True luxury goods possess pricing power decoupled from raw material costs. Their pricing is unaffected by economic cycles, material or labor cost fluctuations, deriving entirely from brand premiums built on irreplicable soft assets such as royal heritage and historical legacy.

In contrast, Laopu Gold's price increases rely far more on "gold itself" than on the "Laopu" brand. Due to gold's extremely high value proportion in its products, the worth of the jewelry consumers purchase still largely depends on the gold price. The strong correlation between Laopu Gold's performance changes and gold prices serves as compelling evidence of this dynamic.

While Laopu Gold struggles to overcome its inherent "value anchored to gold price" trait, and its luxury narrative cannot be fully validated, it has nonetheless achieved differentiated operations distinct from other gold retailers. Even without attaining the valuations of top-tier luxury houses, it will likely maintain a valuation premium over ordinary gold shops.

Reshaping Valuation Through Luxury Brand Storytelling

A little-known fact: Gold is the lowest-margin category in the jewelry industry. China National Gold Group once recorded a gross margin below 3%.

Low profits translate to low valuations. Gold retailers like Chow Tai Fook have long traded at PE ratios aligned with the traditional manufacturing sector's 10x benchmark, even during periods of favorable gold price movements and rapid store expansion, their PE rarely exceeds 20x.

Laopu Gold is an exception. In 2025, its PE ratio temporarily surpassed 100x. This stark valuation gap arises because Laopu Gold, through a comprehensive luxury narrative system, executed a valuation transition from "selling gold" to "selling luxury goods".

The business model of gold retailers is structured as gold price plus a fixed processing fee. Since gold prices are highly transparent, their pricing must follow market movements. The industry earns only meager processing fees, so despite appearing to operate brand businesses, their PE multiples are benchmarked against manufacturing.

Luxury goods operate differently, with their core business model centered on capturing scarcity premiums, often achieving gross margins exceeding 50%. Top luxury houses like Hermès have historically commanded PE ratios close to 100x. Laopu Gold gradually cultivated luxury-like characteristics through operational strategies, thereby altering the capital market's valuation of the company.

The two core traits of luxury goods are pricing power and value retention, and Laopu Gold's luxury narrative system revolves around these two pillars.

On pricing power, traditional gold brands use gold-anchored pricing, but Laopu Gold's pricing is decoupled from gold prices, adopting a universal fixed-price model. This means the brand no longer merely earns labor fees, but captures brand premium margins.

To build this fixed-price capability, Laopu Gold's first step was craftsmanship innovation. While most gold retailers focus on plain solid gold jewelry, Laopu Gold specializes in ancient-style gold: a collection of traditional goldsmithing techniques including openwork, filigree, inlay, and enamel, with select pieces adorned with diamonds.

After establishing differentiation through craftsmanship innovation, the brand began marketing scarcity. Laopu Gold's expansion has been extremely restrained, with a site selection strategy that emphasizes exclusivity, only entering high-end luxury malls such as SKP. As of 2025, Laopu Gold operates just 31 domestic stores, comparable to Hermès' domestic store count and far fewer than Chow Tai Fook's 5,000+ locations.

With basic pricing power secured, Laopu Gold set out to imbue its products with luxury-like value retention characteristics. To achieve this, the brand implements scheduled annual price increases. Since 2024, Laopu Gold has adjusted prices 6 times, with a cumulative increase of 118%. The hikes have become progressively steeper, with the last two increases reaching 21.5% and 25% respectively.

By cultivating the luxury traits of high pricing and strong value retention, Laopu Gold not only ignited purchasing enthusiasm among high-end consumers—with queues at its Beijing SKP store lasting at least 6 hours—but also achieved a profitability profile distinct from other gold retailers. While most gold shops record single-digit gross margins, Laopu Gold's gross margin once exceeded 40%.

With luxury characteristics validated by fundamental performance, Laopu Gold completed its valuation transformation. At its 2025 peak, the company's market capitalization approached HKD 190 billion, representing a 26-fold increase within a single year.

The Unclosed Loop of the Luxury Narrative

Following the market capitalization surge driven by its valuation system shift, divergence has emerged around Laopu Gold. Over the past year, its share price has declined by 60% from its peak. Major international financial institutions have turned bearish, with firms like CITIC Securities downgrading Laopu Gold's target price.

The institutional downgrades can be attributed to two primary factors: underwhelming sales performance, and the continuously expanding premium of Laopu's products relative to traditional gold jewelry retailers.

On the sales front, SPDB International cited SKP mall analysts estimating that Laopu Gold's same-store sales at SKP in April could decline 40%-60% year-on-year. While the high proportion of daigou (personal shoppers) at SKP stores means this decline cannot be directly extrapolated to overall performance, it at least indicates that price-sensitive demand such as daigou channels has begun to weaken.

Institutions believe the underperformance is linked to the loss of price-sensitive customers due to the high premium. Citi's calculations show that after Laopu's price increase in February 2026 amid softening gold prices, its premium over traditional gold retailers has exceeded 55%, up from approximately 30% before 2024 and 10% in 2025.

Whether stemming from underperformance following gold price corrections or market concerns over expanding premium ratios, the core issue centers on whether Laopu Gold's luxury narrative can be fully validated.

Universally recognized luxury goods share a clear underlying logic: pricing power decoupled from raw material costs. A Van Cleef & Arpels 18K gold red carnation five-flower bracelet retails for RMB 43,800, yet its raw materials contain neither rare gemstones nor pure gold, with material costs typically accounting for only 10%-30% of the price.

In essence, luxury pricing is unaffected by economic conditions, material costs, or labor fluctuations, deriving entirely from brand premium: historical legacy and even royal patronage have fostered over a century of brand loyalty among consumers; serving as status symbols that signal social distinction further solidifies their premium positioning.

This is precisely why Laopu Gold always frames its price increases as: "based on brand positioning and pricing strategy, with no direct correlation to gold price movements."

However, reality suggests otherwise—its price increases are far more dependent on "gold" than on the "Laopu" brand.

Due to gold's dominant value proportion, most consumers still judge the worth of Laopu's jewelry by the underlying gold price. Laopu Gold's own performance trajectory provides strong supporting evidence.

Laopu Gold was founded in 2009, but its explosive growth and capital market recognition have all occurred post-2024. Between 2024 and early this year, gold prices experienced a prolonged unilateral uptrend, surging from $2,000/oz to over $5,000/oz.

Before this gold rally, Laopu Gold's inventory days extended to a full year—roughly twice that of Chow Tai Fook—indicating poor inventory turnover. By H1 2025, however, its inventory days had dropped to 150, while revenue expanded nearly 9x within two years.

Now, as gold prices correct, institutional data shows Laopu Gold's sales have fallen short of expectations.

If gold prices continue to trend downward and Laopu Gold's performance consequently corrects, its luxury narrative will struggle to close the loop, potentially triggering another transformation in its valuation framework.

Sustaining Differentiation as the New Pricing Anchor

Despite the valuation pullback, Laopu Gold's current valuation still outperforms traditional gold retailers. Its PE ratio has corrected to 13x, but remains well above Chow Sang Sang's 4x. The gap in per-store valuation is even more pronounced, with Laopu Gold's per-store value reaching 70x that of Chow Tai Fook.

The sustained valuation premium over traditional gold retailers stems from Laopu Gold's luxury-aligned business model, which has successfully captured a higher share of high-net-worth customers and achieved a superior profitability structure.

According to Laopu Gold's financial reports, its user overlap with luxury groups exceeds 82%. A high proportion of high-net-worth individuals implies lower operational risk. Meanwhile, its fixed-price business model has enabled Laopu Gold to significantly outperform other gold retailers in profitability. In 2025, Laopu Gold's revenue was only 31% of Chow Tai Fook's, yet its profit reached 55% of the latter's.

However, maintaining these advantages faces two major challenges.

First, following the gold price correction, as a "premium alternative" gold brand, Laopu Gold may experience greater performance volatility than its peers. This will require verification through financial data in the coming quarters.

Second, the sustainability of Laopu Gold's differentiation remains uncertain. Its luxury narrative is inherently replicable: unlike traditional luxury brands that rely on accumulated soft assets such as brand history and royal heritage, Laopu Gold's luxury attributes are primarily cultivated through operational tactics that emulate external luxury traits.

The challenge is that gold prices are public information, and value retention is not exclusive to Laopu Gold's stores. While ancient craftsmanship is intricate, it is likely a widely accessible technology, and traditional players like Chow Tai Fook are already replicating Laopu Gold's business strategies down to the smallest detail. That said, consumer mindset currently favors Laopu Gold—Chow Tai Fook, with its 5,000+ stores, would likely struggle to convince the public of its own luxury brand narrative.

Whether Laopu Gold can maintain its differentiation will become its new pricing anchor, requiring ongoing cross-validation against competitors' financial results.

While future valuation remains highly uncertain, and Laopu Gold's luxury narrative will likely never fully break free from the gravitational pull of gold prices, it has executed an exceptional market capitalization management strategy in an industry marked by weak barriers to entry and difficulty in differentiation. Even if it never achieves Hermès-level valuations, it will likely sustain a long-term valuation premium over traditional gold retailers like Chow Tai Fook.

This article is from WeChat Official Account "Insight Finance", authored by Du Dongjun, published with authorization from 36Kr.