Citigroup has issued a research report indicating that while sales for LAOPU GOLD (ASX: LPGL) in May this year are expected to surpass April's figures due to holiday promotions, performance during the Tmall 618 shopping festival to date has been weaker than anticipated.

This is likely attributable to a loss of price-sensitive customers resulting from high premiums.

The bank notes that following a price increase in February and a subsequent softening in gold prices, LAOPU GOLD's premium over traditional gold jewelry retailers has exceeded 55%.

This is significantly higher than the approximately 30% level seen before 2024 and the projected 10% for 2025.

Based on a forecasted price-to-earnings ratio of 15 times for the 2027 fiscal year, Citigroup has sharply reduced its target price for LAOPU GOLD from HK$1,162 to HK$700, while maintaining a "Buy" rating.

The bank believes that with the temporary exit of price-sensitive customers, the remaining clientele consists more of loyal customers who recognize the brand's quality, design, and service.

This shift is expected to reduce the future correlation between sales and gold prices, thereby enhancing the predictability of earnings.

Furthermore, LAOPU GOLD continues to strengthen its store network, including opening a new outlet at The Parisian Macao at the end of May, as well as relocating or renovating stores at Hangzhou Tower and Shanghai Xintiandi.

Considering the downward revision in online sales expectations, Citigroup has lowered its revenue forecast for LAOPU GOLD for the 2026 fiscal year by 6% to RMB 37.7 billion.

However, benefiting from an improved gross margin forecast, the net profit projection remains unchanged at RMB 8.26 billion.

For the 2027 and 2028 fiscal years, to reflect annualized performance following the loss of price-sensitive customers, the bank has reduced its revenue forecasts for the two years by 29% to 30% and its net profit forecasts by 27% to 28%.