Holiday Jewelry, Luxury Sales Show Continued Strength

Reuters

Jewelry sales for the holiday season have increased 2.6 percent year-over-year, according to MasterCard Advisors’ SpendingPulse, which tracks national retail and services sales. Luxury sales, excluding jewelry, are doing slightly better at 2.8 percent.

Jewelry sales have grown steadily in the latter part of the season, according to the report, which tracks sales from October 31 to December 11. Overall, retail sales are generally up with some exceptions, most notably electronics.

“The modest growth we first saw with the August Back-to-School season has accelerated. These results suggest that retail spending continues to gain traction,” said Michael McNamara, MasterCard Advisors SpendingPulse vice president. “Most sectors are showing steady improvements, with Electronics, Department Stores and Furnishings categories recording flat to small declines. The solid November growth rates have continued across most areas through the first half of December.”

In addition to jewelry and luxury, SpendingPulse, which uses card swipe data from MasterCard and estimates of other payment methods, analyzed the Electronics, Apparel and eCommerce sectors. Here are the midseason highlights:

eCommerce
eCommerce continues to be one of the stars of the season with a season-to-date growth rate of 13.5 percent. The sector has been showing double-digit weekly year-over-year growth rates since the second week in November.

Apparel
The Total Apparel category was up 9.8 percent for the season-to-date. Women's Apparel sales were up 4.4 percent for the season with the category recording a slightly better showing since Black Friday. Men's Apparel sales grew 8.4 percent year-over-year. Growth within the Teen and Family Apparel segments is also strong.

Electronics
Electronics sales fell below 2009 levels during the three weeks leading up to Black Friday. Sales during the rest of the period barely made up the decline, with sales season-to-date recording a 0.4 percent increase over last year.

Curiosity Killed the Cat but Gives Birth to Great Sales

This is one of a series of articles by Mónica Arias of Excellence Consulting, a luxury sales and marketing consulting firm based in Buenos Aires, Argentina. These articles will focus on ways that sales and marketing professional in the jewelry and luxury industries can improve their techniques.

How important is it to be curious in the sales profession? It’s very. and for many reasons.

To start, because the more questions you ask your customers, the more chances you will have to gather information about them. This will reflect in more “tailored” or “suitable” options to offer from which they can choose from. No secret here: asking open questions is one of the golden rules in this profession.

But, how do you do it without being “salesy” or sounding pushy? By interacting with your clients in a natural manner—bearing in mind that you need to make them feel comfortable with you, way before making a demonstration. The situation, of course, will vary depending on the sales context itself, but the rule applies to almost all sales situations: first make connection with your clients, then, and only then, start displaying some options according to what you captured could match their wishes or desires.

Secondly, being curious and asking open questions will ease your way to even something more challenging and magical: you could make your client feel a new need or sudden desire to acquire something he did not even think of. Many salespersons stop questioning clients after they closed the sale, or when they are about to, because they do not feel comfortable with a continuous “post sales” dialogue. However, more often than not, you can sell extra items by simply maintaining a natural flow of questions.

Asking open questions is a way to nourish your relationship with clients and provide something they will adore: excellent service.

You will be noticed, acknowledged and remembered by your clients. Your job is not only selling or reaching your goals, but also having in mind that they need to be assisted in the most appropriate manner, even if the sale does not occur. They need to feel your kindness and professionalism all the time, and you must always go the extra mile in order to give good advice and serve them with high quality standards.

Some sales consultants do not believe that curiosity should be applied to the sales profession. They argue that being curious in the sales process may lead to misunderstandings. Although it is true you are not supposed to ask intimate questions or look as if you were trying to interfere in your customers´ private lives, I think it all depends on other factors rather than the questions themselves: you have to pay close attention to your tone or voice, how you look at your clients straight to their eyes, the way in which you listen to them with your full attention, the manner in which you address your clients, the way you gesture and so many other details which make curiosity look like a poor term to apply after all.

If you love sales, you need to keep curiosity alive because, as it happens with all professionals, you must have you skills updated. You will have to read new books, refresh your vocabulary, search the web for online courses and articles and enrich yourself with new materials. In other words: Never disregard curiosity. It may have killed the cat but will it certainly help you give birth to great sales and your best performance.

Mónica M. Arias
Excellence Consultant: Helping you discover how to reach your next level through excellence.
contacto@monicaarias.com.ar
Copyright 2011

$45 Billion Spent on Black Friday, Jewelry Sales Up 2.6%

Approximately 212 million shoppers visited stores and websites over Black Friday weekend, up from 195 million last year, according to the National Retail Federation. People also spent more, with the average shopper this weekend spending $365.34, up from last year’s $343.31. Total spending reached an estimated $45 billion.

“While Black Friday weekend is not always an indicator of holiday season performance, retailers should be encouraged that a focus on value and discretionary gifts has shoppers in the spirit to spend,” said Matthew Shay, NRF president and CEO. “As retailers look ahead to the first few weeks of December, it will be important for them to keep momentum going with savings and incentives that holiday shoppers simply can’t pass up.”

According to the survey conducted over the weekend by BIGresearch, the number of people who began their Black Friday shopping at midnight tripled this year from 3.3 percent last year to 9.5 percent in 2010. By 4 a.m., 24 percent of Black Friday shoppers were already at the stores. Thanksgiving Day openings have also been a boon to the industry, as the number of people who shop on Thanksgiving—online and in stores—has doubled over the past five years, from 10.3 million in 2005 to 22.3 million in 2010.

The number of people who purchased jewelry over the weekend rose substantially, from 11.7 percent last year to 14.3 percent this year. In addition, more people purchased gift cards, toys and books and electronic entertainment than a year ago.

“It’s certainly encouraging to see an increase in traffic and sales from the four-day holiday weekend, however, consumers still have concerns about the economy, jobs, and paying down debt,” said Phil Rist, EVP, BIGresearch.  “It was the consumers’ search for deals and bargains that drove the weekend traffic rather than their confidence in the economy.”

While shoppers seemed focused on getting good deals, items of strong value seemed to win out over the absolute lowest prices, according to the survey. Both department stores (52% this year vs. 49.4% last year) and clothing stores (24.4% vs. 22.9%) saw healthy increases in traffic, while the percentage of people who shopped at discounters declined from 43.2 percent last year to 40.3 percent this year. The percentage of people who shopped online this weekend rose 5.1 percent, from 28.5 percent last year to 33.6 percent this year – a strong sign heading into Cyber Monday, a marketing term created by Shop.org, a subsidiary of NRF, for the Monday immediately following Black Friday for online shoppers.

The survey, conducted Nov. 25-27, polled 4,306 consumers and has a margin of error of plus or minus 1.5 percent.

Three Keys to Selling Fine Jewelry

This is one of a series of articles by Mónica Arias of Excellence Consulting, a luxury sales and marketing consulting firm based in Buenos Aires, Argentina. These articles will focus on ways that sales and marketing professional in the jewelry and luxury industries can improve their techniques.

When it comes to offering true beauties such as fine jewelry, someone who is in the sales profession but not in this industry may think it relatively easy to succeed in closing deals. The truth is more often than not, even when the jewelry pieces are signed by renown designers or belong to famous traditional brands, deals are not that easy to close.

Whether person to person or as a group, there is a tendency to trust mainly in the brand without taking into account we are dealing with people who are literally attracted by the luxury object. Either because they are really fascinated by it, they have seen it online, they love to purchase jewelry as an investment, want to have the “last” version of a collection, or simply because they just love jewelry.

This distinction of placing desire into the customer´s momentum helps salespeople identify what pieces we believe will make the “click” in their inner volition to purchase.

In order to understand this concept more clearly, if you own a jewelry store or you are a sales person in the jewelry market and you have been having difficulties in closing more sales lately, attracting more clients, or making your customers come back to you, it is necessary for you to stay open minded. Forget for a moment all you have learned so far, and get ready to apply these three keys that will help you close more deals.

Make your client your priority

Now, this may sound obvious, but be true to yourself and think for a moment: how many times have you really considered your client’s priority when in a sales process? Frankly, from my own experience, I just wanted to sell, partially because that is what I love to do, and partially because I focused the process in my expertise of making extraordinary demonstrations and being very good at closing, You know what I am talking about: we have the beautiful product many times backed by an excellent brand, we have learned to offer it by heart, we are experts in overcoming objections and we generally arrive to lovely deals. However, there are other times in which we know things did not go very well in the process. Something was missing, and we cannot understand what it was. Things gradually change when you make your customer your priority. You achieve this by taking advantage of some of the strategies I have used, such as: letting go of your objectives and eagerness to sell; going into the depths of the communication process you’ve established with the client; and using words of appreciation to show that it is the customer that you care the most about. It is in your true interest to you make the person feel fantastic about their purchase.

Prepare a list of special words and questions

If you have a list of words and questions that could help you describe your products more confidently and connect with your customers in a more natural way, you have a treasure-like tool that you will rely upon. It takes only ten minutes a day to craft the list and by the end of the month you should have a diary of strategic beautiful phrases, words and questions in order to study and use every time you are in the sales arena. Trust me, having this list handy is priceless because it can help you start a more meaningful, trustworthy relationship with your customers.

Stay in touch

Use your customer’s personal or professional information to stay in touch. It is your duty to continue to be present once they’ve left and returned to their hectic lives or have started to forget you. This is normal for all of us. We usually do not remember the salespeople we meet in a store, unless we have experienced such a great moment by purchasing something lovely from them. In any case, this may only last a couple of days. 

Resort to your special list and, whether the customer purchased from you or not, do your job and ask for their information for future reference. If you find resistance, you could explain to them (using your list of words) that you wish to stay in touch even from a distance because you want them to be informed of the latest versions of the collection, new launches, and, most importantly, you would love to learn if you could be of future assistance because you value them the most.

More sales will follow once you have internalized these three keys as part of your performance and at the same time you will have set the foundations for providing excellent service.
    
Mónica M. Arias
Excellence Consultant: Helping you discover how to reach your next level through excellence.
contacto@monicaarias.com.ar

Excellence: The Experience Your Customers Deserve

This is the first in a series of articles by Mónica Arias of Excellence Consulting, a luxury sales and marketing consulting firm based in Buenos Aires, Argentina. These articles will focus on ways that sales and marketing professional in the jewelry and luxury industry can improve their techniques.

So much has been said about improving customer service during the past decades that, given the global exposure of firms on the Internet and the world economic turmoil, one could easily assume this issue does not exist anymore simply because in theory, companies should have learned enough from the tough lessons associated with a poor customer assistance in the past.

Unfortunately, the problem not only persists but it has also become a real challenge to overcome, especially in the retail arena, and more specifically, in the luxury retail industry where excellence is non negotiable.

Customers are Kings (and Queens!). These words should be repeated like a mantra every day, all day long, by anyone trying to do business nowadays. And, more importantly, they should be put into practice just for the sake of business survival. Whether small or large, a company that provides luxury services or products that does not excel in customer service, even through small details, is paving the road to hell.

Let me give you an example: let´s imagine you may be inclined to get a lovely piece of jewelry for your beloved. The idea warmed up for a while in your head and the decision is finally made to visit a renowned jewelry store. You step in, confident that you will be received like a King—after all this is a shop you do not put your feet into everyday as it is the supermarket or any retail store you visit with certain frequency. Instead, you just get what I call “a scanning look” and someone with unforgettable body language clearly indicates you are not especially welcomed, even with a slight smile on their face. Believe me, you do not actually “see” this, but you clearly feel it.

You may think this is unusual in the luxury industry. It is my duty to tell you it is not. Reality shows that many luxury companies judge their clients either by their aspects, their race, their origin, the way they speak or move, they way they are dressed, and the list is endless. Moreover, they “rely” so much on their brands, reputation, tradition and marketing campaigns that they generally forget self-criticism and/or periodic research to understand what kind of feedback they receive from clients, how are they being perceived and, most importantly, if their customers  really like them.

Prejudice, unwillingness, lack of enthusiasm, poor or inexistent customer oriented training, payment systems that do not work properly after the sale is done, salespeople who are not trained in the appropriate way to offer a service of excellence to customers, the lack of a system to build trust and loyalty is only part of the problem.

Business owners and salespeople in the luxury segment have countless excuses not to address this lack of attention to their business core. Excuses come in all sizes and colors, and of course the matter of “budget” is one of the most common ones. However, excellence in customer service has more to do with small details, attitude and care than huge budgets.

People need to feel the great experience of having purchased with you, and you need to acknowledge that the sales process has evolved, so you need to learn how to transcend your clients` expectations by providing the excellence service they deserve. Always.

Mónica M. Arias is a luxury sales and marketing specialist and a Spanish and English translator. She has spent 15 years experience working in a variety of sales marketing positions for several multinational companies. She is skilled in advanced sales techniques and is a proven expert in person-to-person interaction—both commercial and personal. She can be reached at contacto@monicaarias.com.ar.

Pandora Q3 Sales Double, Profits Triple

The new darling of the jewelry industry and the investment world, Pandora, said Thursday that sales in the third quarter more than doubled and profit nearly tripled, year-over-year, driven by growth across all regions and jewelry categories, according to media reports.

Total revenues for the Copenhagen-based jewelry company grew by 117 percent year on year to 1.79 billion Danish crowns ($329,100), with 48 percent of total sales from Europe and 41 percent from the U.S. Much of that growth was due to early Christmas orders, the company reportedly said.

Sales of its top product, charms and charms bracelets (which accounted for 79 percent of total sales) increased 94 percent. Despite the high cost of precious metal, sales of silver and gold charms were up 84 percent.

Pandora’s other jewelry sectors, such as its high-end Love Pods collection, has a 345 percent sales increase. The non-charm jewelry lines accounted for 20 percent of revenues in the quarter, up from 10 percent in the same quarter in 2009.

Sales in the U.S. market rose 93 percent, representing 41 percent of total sales. The Asia-Pacific region (which accounts for 11 percent of total sales) grew by 30 percent for the period.

Net profit at Pandora rose 280 percent to 581 million Danish crowns ($106.8 million) in the third quarter. Gross margin at the group in the quarter was 73 percent, up from 66 percent in the third quarter of 2009 when the gross margin was impacted by an unrealized gain on raw materials and a negative one‐off effect from taking over the company’s Australian distributor.

“Our strong performance in the third quarter of 2010 is a result of our continued success in upgrading our existing customers, thereby increasing the share of branded sales as well as roll‐out of new stores around the world—particularly in Italy,” Mikkel Vendelin Olesen, Pandora chief executive, reportedly said. “We have seen continued strong momentum in the revenue development from our charms and silver and gold charm bracelets as well as excellent performance from our other jewelry collections. However, it is important to notice that our Q3 also is positively impacted by early Christmas orders from retailers.”

Pandora had a spectacular debut on the Copenhagen bourse on Oct. 5 with a $2 billion IPO. The company manufactures and distributes mass market jewelry, priced between $50 and $1,500, designed at its Copenhagen headquarters and made in Thailand.

Bulgari 3Q Sales Up 15%, Jewelry Sales Up 14%, Watch Sales Down 11%

Italian luxury jeweler Bulgari SpA said Thursday that third quarter sales increased 15 percent year-over-year to 267.9 million euros ($366.7 million). At constant exchange rates (excluding currency fluctuations and other conditions) sales rose 5 percent for the period, ended Sept. 30.


Net profit for the period increased 138 percent year-over-year to 16.6 million euros ($22.7 million) for the Rome-based company.


Third-quarter jewelry sales rose 13.7 percent year-over-year (24.2% at constant exchange rates) due to the excellent sales performance of its B.zero1 line and the Serpenti collection. Watch sales fell 10.9 percent (down 1.8 percent at constant exchange rates). However, the company said it was not a fair comparison since delivery of new products this year began in September and continued in the three subsequent months, while last year the new launches were available starting in the second quarter. In October, watch sales grew by 6 percent. The company said that the women’s Serpenti watch collection had an “excellent reaction.” The steel version was available in stores in September, followed by the gold version at the end of October. 


The company also said October wholesale sales were greater than what was recorded in directly owned stores, which confirms the recovery of this distribution channel after last year's massive de-stocking. The company noted that the new Bulgari Roth and Genta models unveiled this year in Basel were “remarkably well-received by customers in directly owned stores.”


Perfume sales fell 4.1 percent for the period. (3.5% at constant exchange rates) but began to rise again in October, recording an increase of 5 percent. Accessories sales increased 35.3 percent (54.8 percent at constant exchange rates).


Sales in Europe for the third quarter rose 11 percent year-over-year, with sales in Italy up 24.4 percent. Sales in America fell 7.4 percent. The sales trend in America, however, adjusted to take into account the normal volatility of high-end jewelry, recorded a growth of 6.4 percent. In Asia, Japan sales show continued weakness, down 1.1 percent, while the rest of Asia grew 15.4 percent for the period. In China, sales grew 24.3 percent for the period. Sales in the Middle East and other areas fell 1.5 percent. However, this is an improvement compared to second quarter sales decline of 10.8 percent.


“I am satisfied with the third quarter results—particularly with the excellent performance of jewelry and accessories and the notable improvement in profitability—which are in line with our plans and clearly show that the company is continuing to improve, both in terms of product and image and in terms of investment control, indebtedness, inventory and costs,” said Francesco Trapani, Bulgari Group CEO.

Richemont Sales Up 37%, Jewelry Sales Up 32%, Watch Sales Up 38%

Richemont headquarters

Luxury goods group Cie. Financiere Richemont said Friday that year-over-year sales for the six months of 2010 increased 37 percent to 3.26 billion euros ($4.47 billion). At constant exchange rates (excluding currency fluctuations and other conditions) the increase was 27 percent for the period ended September 30. When removing the company’s recent acquisition of Internet retailer Net-A-Porter.com, sales increased by 22 percent.

The Geneva-based company said the strong growth in sales reflects, in part, low comparative figures in the prior period, when reported Group sales decreased by 15 percent.

Profit for the period rose 87 percent to 644 million euros ($883 million) and operating profit increased by 95 percent.

Its jewelry business (which includes Cartier, Van Cleef & Arpels and Piaget) saw its sales increase 32 percent to 1.69 billion euros ($2.31 billion) for the period. Both Cartier and Van Cleef & Arpels saw double-digit sales growth, Richemont said.

Watch sales (which include Vacheron Constantin, Baume & Mercier, Jaeger-LeCoultre, Lange & Söhne and IWC) rose 38 percent to 901 million euros ($1.23 billion).

Overall Group sales as measured by constant exchange rates increased 37 percent in the Americas, 36 percent in Asia-Pacific, 23 percent in Europe and 4 percent in Japan.

Johann Rupert, Richemont executive chairman and CEO, stressed that the strong sales figures benefited from favorable exchange rates and better economic conditions when compared to the post-recession prior year and cautioned that growth may slow during the second half of the year.

“The good performance achieved by Richemont in the first half of this year has been driven by a marked improvement in all business areas and across all geographies compared to the depressed levels seen last year,” Rupert said. “Richemont’s Maisons were able to benefit fully from this improved trading environment, further enhancing their leading positions in jewelry, watchmaking, writing instruments and accessories. … The robust sales momentum that the Group has seen for several months has continued through to the end of October; sales for the month were 36 per cent above those of October 2009 at actual exchange rates.”

He added, “For the second half of the financial year, we expect the high rate of growth in sales seen in the year to date to slow as a consequence of exchange rate movements and the more challenging prior year comparatives.”

Signet Sales Up 1.7%, Same Store Sales Up 4.5 Led by U.S. Performance

Signet Jewelers, the world's largest specialty retail jeweler, reported Thursday that total sales rose by 1.7 percent to $722.8 million and same-store sales rose 4.5 percent in second quarter, ended August 1. Income before taxes for the Bermuda-based jewelry retailer rose 48.8 percent to $57.3 million. Net income was $40.7 million, an increase of 47.5 percent.

“We are pleased with our performance in the second quarter,” Terry Burman, said Signet chief executive of the company which operates jewelry retail stores in the U.S. and U.K “The outlook for the rest of Fiscal 2011 is uncertain. However, we will continue to invest in the business, increase advertising during the holiday season and expand further the availability of differentiated merchandise, in an effort to continue to gain profitable market share."

Sales in the U.S. (which accounted for 80.4 of total group sales for the period) rose 5.1 percent to $580.8 million and operating income rose 26 percent to $63.3 million. Same-store sales rose 5.9 percent. Average unit selling price across all store brands rose 4.7 percent to $407. Kay jewelers reported sales of $325.4 million with same-store sales increasing by 2.6 percent. Jared reported sales of $190.7 million and same-store sales jumped 14 percent.

Sales in the U.K. (which accounted for 19.6 percent of total group sales for the period) fell 2 percent in constant exchange rates and same-store sales fell 0.5 percent. Operating income however rose to $4.7 million compared with only $1 million one year ago. Average unit selling prices increased 12 percent. A stronger dollar, record gold prices and higher tax rates drove gross margin lower by 30 basis points in second quarter. Signet observed no real change in economic activity during the second quarter compared with the first quarter in the U.K.

“The consumer environment in both the US and the UK remained challenging in the year to date, however the business continued to utilize its competitive advantages to improve sales, enhance margins, and strengthen its balance sheet,” the company said in its report.

Signet operates 1,893 stores, including 1,345 stores in the U.S., where it trades as Kay Jewelers, Jared The Galleria Of Jewelry and under a number of regional names. Signet also operated 548 stores in the UK division, where it trades as H.Samuel, Ernest Jones and Leslie Davis.

LJ International Revenue Up 26%, Profit Up 59%, Led by China Retail Business

The Enzo retail chain in China is a stellar performer for  LJ International.

Hong Kong-based jewelry manufacturer and retailer, LJ International Inc., reported Thursday that operating revenue in the second quarter increased 26 percent to $41.5 million. Gross profit increased 59 percent to $20.6 million. Operating income increased 13 percent to $3.3 million. Net income for the period ended June 30 rose 67 percent to $3.85 million.

It was the company’s retail division in China led the way showing exceptionally strong sales and offsetting a decline in its international wholesale business due the sluggish economy in the U.S. and Europe.

The company, which owns the Enzo store chain in China, reported that second quarter retail sales increased 70 percent year-over-year to $28.4 million. Same store sales for the period increased 61 percent for the period, ended June 30. Enzo added 16 new stores in the second and since then added another 12 stores to boost its branded retail chain to 166 stores. LJ International said it will continue to aggressively expand its retail network in China.

LJ International’s wholesale revenue fell 19 percent to $13.16 million year-over-year. Sales from the U.S. and Europe decreased 26 percent and 6 percent year-over-year, respectively, representing 71 percent and 20 percent of wholesale revenue. Meanwhile, sales from Asia and other markets grew 49 percent and represented 9 percent of wholesale revenue for the period. The company distributes a full complement of jewelry lines under the Lorenzo brand name to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers in North America and Western Europe.

“Our solid financial performance came in ahead of our expectation, mainly driven by the stronger than expected performance of Enzo, the retail business arm targeting affordable luxury segment,” said Yu-Chuan Yih, LJ International chairman and CEO. “Consumer and luxury product markets are widely perceived to be two of the fastest growing sectors in the expanding Chinese economy. Enzo, with solid financial strengths, will continue to expand its retail network, deepening penetration in its affluent first and second tier city network while strengthening its presence in the third tier cities. We are well on track to operate a network of about 200 stores at the end of the year and have scheduled to add approximately 26 stores by the end of the third quarter, bringing the number to about 180 stores.”

Yu-Chuan Yih added, “Amid an intricate macro environment which impacts the wholesale markets, we remain a key partner of our long-standing wholesale customers, which has warranted stable sales throughout the economic cycle. We will focus on strengthening collaboration with core customers to better align product strategy and design with the changing preferences of the end consumers, to add value to our strong relationship with leading wholesale customers; and our high quality of products and services would continue to help us maintain a steady growth in the wholesale business amidst unfavorable market conditions.”

In its outlook the company said it expects a 19 percent to 25 percent increase in gross revenue, year-over-year, to $42.5 million and $44.5 million. This outlook is fueled by an expected 33 to 38 percent increase in retail sales in the range of $28 to $29 million for the period. Wholesale revenue is expected to be $14.5 million to $15.5 million, representing a flat growth rate to an increase of 6 percent for the period.

More financial highlights for the second quarter after the jump:

Gross profit margin in the second quarter 2011 was 50 percent, an expansion of 11 percentage points primarily due to the margin expansion of retail business.

Retail gross profit in the second quarter was up 97 percent year-over-year to $18.8 million. Retail gross profit margin in the second quarter was 66 percent, a year-over-year expansion of 9 percentage points. The increase in retail gross profit margin was primarily due to a more favorable sales mix, with more sales of colored gemstone items, the company said.

Wholesale gross profit in the second quarter fell 47 percent to $1. 7million. Wholesale gross profit margin in the second quarter fell 14 percent, down from 21 percent in the second quarter 2010. The decline in wholesale gross profit and gross profit margin was primarily due to a change of costing methodology.

Sales, general and administrative expenses in the second quarter 2011 increased 66 percent year-over-year to $10.2 million. As a percentage of operating revenue, SG&A expenses were 25 percent, compared to 19 percent in the second quarter 2010. The increase was primarily due to an increase in investment in marketing campaign and marketing team to support the continued strengthening of brand building.

Rental expenses in the second quarter 2011 increased 98 percent year-over-year to $6.1 million. As a percentage of operating revenue, rental expenses were 15 percent, compared to 9 percent in the second quarter 2010. The increase was primarily due to rental costs are mostly sales-linked and trended up as retail revenue saw a significant increase during the quarter. The increase was partly due to the increase in rental space as a result of expansion of retail network.

Depreciation in the second quarter 2011 was $960,000, up 101 percent year-over-year.

Operating expenses, including SG&A expenses, rental, net gain (loss) on derivatives and depreciation, increased 73 percent year-over-year to $17.2 million in the second quarter. As a percentage of operating revenue, operating expenses were 42 percent, compared with 30 percent in the second quarter 2010.

Operating income in the second quarter 2011 increased 13 percent year-over-year to $3.3 million.

Operating margin in the second quarter 2011 was 8 percent, compared to 9 percent in the same period 2010.

Operating income from retail business in the second quarter 2011 was US$4.4 million, up 106 percent year-over-year. Retail operating margin was 16 percent, compared to 13 percent in the second quarter 2010.

Operating loss from wholesale business in the second quarter 2011 was $660,000 compared to an operating income of $1.15 million in the second quarter 2010. The operating loss from wholesale business in the second quarter was impacted by the reduced revenue caused by change in sales return provision and a reduced gross profit caused by revised inventory valuation.

Net other revenue in the second quarter 2011 amounted to $1.24 million, compared to an expense of US$0.20 million in the second quarter 2010.

Income tax expenses in the second quarter 2011 were $740,000, compared to $450,000 in the second quarter 2010, mainly due to a smaller amount of tax benefits for retail business during the period.

Net income from operating businesses and excluding non-recurring items and derivative gain from warrants is forecast to be in the range of $3.5 million to $4 million, a 9 percent to 25 percent year-over-year increase.

U.S. and E-Commerce Businesses Fuel 10.4% Jump in Signet’s Q1 Sales

Signet Jewelers Ltd., the largest specialty retail jeweler in the U.S. and the U.K., said first quarter sales increased 10.4% year-over-year to $993.6 million. Same store sales increased 6.4% compared to a rise of 1.2% for the same period in the previous year. E-Commerce sales rose 40.7% to $31.1 million.

Operating income increased 10.4% to $142.8 million and diluted earnings per share rose 17% to $1.13 for the company that owns the Kay, Jared and Ultra jewelry retail chains in the U.S. and the H.Samuel and Ernest Jones jewelry retail chains in the U.K.

The U.S. division, which accounts for approximately 86 percent of total company sales, again was the driver in the strong performance. Total U.S. sales increased 14.3% to $858.6 million. Same store sales increased 8.1% compared to an increase of 1.2% for the period. The increases were driven by broad based strength across all merchandise categories in their Kay and Jared jewelry chains, as well as its recent acquisition of the Ultra jewelry store chain. E-Commerce sales increased 48% to $25.6 million.

“We were very pleased with our results throughout the quarter, including Valentine’s Day and the run up to Mother’s Day,” said Mike Barnes, Signet CEO.

The UK division, which accounts for approximately 14 percent of total company sales, reported weak results. Total sales fell 9.1% to $135. Same store sales fell 2.3% compared to an increase of 1.2% in the first quarter Fiscal 2013. The company said the sales decline was due to a same store sales decrease of $3.1 million primarily in H.Samuel, the impact of closed stores of $4.8 million, and currency fluctuation of $5.6 million. In Ernest Jones, the number of transactions increased and there was strength in the bridal business and watches (excluding Rolex, which is being offered in fewer stores in the UK). In H.Samuel, the number of transactions declined, resulting in lower sales across most merchandise categories. E-Commerce was a bright spot, increasing 14.5% to $5.5 million.

In its guidance, Signet says it expects the shift of Mother’s Day sales this year partly into the first quarter to impact second quarter sales and earnings performance. In addition, integration costs and the seasonality of the company’s newly acquired Ultra Stores are expected to dilute profits. The company expects Ultra to be a positive contributor to the company’s bottom line by the fourth quarter.

The company also said it plans to open 70 to 80 Kay and Jared stores by the end of the fiscal year.
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Pandora Jewelry Returns to Strong Profit And Growth

Pandora—whose short history as a publicly traded company was marked by spectacular growth followed by an even more spectacular fall—is back on track dramatically increasing its sales and profit for the first quarter of 2013.

The Danish company, known for its popular charm bracelets, said Tuesday that group revenue for the period increased 40 percent year-over-year to 2.002 billion Danish krones ($348.6 million). Profits increased 29.6 percent DKK 438 million ($76.3 million).

The international company—which manufactures, distributes, retails and markets its branded jewelry—reported extremely strong increases in all regions of the world where it operates. Its regional breakdown for the first quarter is as follows:

* Americas: Up 38 percent (38.6 percent in local currency);
* Europe: Up 50.4 percent (50.6 percent in local currency); and
* Asia Pacific: Up 26.1 percent (27.7 percent in local currency).

The company noted that as it expected, gross margin fell to 65.6 percent for the period, compared to a gross margin of 71.6 percent in the first quarter of 2012. The company did not give a reason for this expected drop. 

“Although it is still early in the year, we have had a strong start,” said Pandora CEO Bjørn Gulden, who will leave the company at the end of the month to join sports brand Puma. “Revenue and earnings increased across all regions, positively impacted by the delivery of the Valentine's Day collection in Q1 2013, instead of, as historically, in the fourth quarter. Even more importantly, our sales-out in ‘Concept’ stores (branded stores owned by the company) has also strengthened with double digit growth in our four major markets. Some of this increase is due to the fact that Easter was in Q1 this year compared to Q2 last year, but we believe most of it is due to better products, improved marketing and better execution in the stores.”

The company’s financial guidance was unchanged from the prior quarter. It expects revenue of to be above DKK 7.2 billion ($1.25 billion) and expects an EBITDA margin above 25 percent.

Other highlights of the first quarter 2013 report

* EBITDA increased by 60.3 percent to DKK 643 million ($112 million), corresponding to an EBITDA margin of 32.1 percent, compared to an EBITDA margin of 28.2 percent in the first quarter of 2012.
 
* Free cash flow was DKK 406 million ($70.6 million), compared to DKK 118 million ($20.5 million) in the first quarter of 2012.
 
* Pandora bought back 398,153 shares corresponding to DKK 61 million ($10.6 million) as part of the on-going DKK 700 million ($121.8 million) share buyback program.
 
* Pandora expects to open approximately 150 Concept stores in 2013.

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Blue Nile Q1 Sales Up 16.9%, Profit Exceeds $800,000

The year has begun well for Blue Nile, Inc. The online diamond and jewelry retailer said Thursday that net sales increased 16.9 percent to $97.1 million for the first quarter ended March 31, led by a near 20-percent increase in U.S. engagement jewelry sales and overall strong growth in all markets.

Net income totaled $832,000, or $0.07 per diluted share, compared with $154,000 in the first quarter of 2012. Operating income for the period totaled $1.2 million, representing an operating margin of 1.2 percent of net sales.

Non-GAAP adjusted EBITDA for the quarter totaled $3.1 million. For the trailing 12-month period ended March 31, net cash provided by operating activities totaled $21.3 million compared to $18.4 million for the same period of the prior year. For the same trailing 12-month period, non-GAAP free cash flow totaled $18.6 million.

“We are pleased to announce significant revenue growth along with expanding profitability in the first quarter of 2013,” said Harvey Kanter, Blue Nile president and CEO. “Clearly our value proposition continues to resonate with consumers, both in the U.S. and internationally.”

Other first quarter 2013 highlights for the Seattle-based company include:

* U.S. engagement net sales increased 19 percent to $55.3 million.

* U.S. non-engagement net sales increased 7.4 percent to $24.2 million.

* International net sales increase of 24.8 percent to $17.6 million. Excluding the impact from foreign exchange rates, international net sales increased 25.9 percent.

* Gross profit totaled $17.6 million. As a percent of net sales, gross profit was 18.2 percent compared to 18.4 percent for the first quarter of 2012.

* Selling, general and administrative expenses for the first quarter 2013 were $16.5 million, compared to $15.1 million in the first quarter of 2012. This includes stock-based compensation expense of $1.1 million for the first quarter of 2013 and 2012.

* Earnings per diluted share for the first the period included stock based compensation expense of $0.05 compared to $0.05 for the first quarter of 2012.

* Cash and cash equivalents totaled $40.5 million.

In its guidance Blue Nile said it expects net sales in the second quarter to be between $100 million and $105 million with earnings per diluted share are projected at $0.13 to $0.17.

The company also said that net sales for fiscal year 2013 (ending December 29) are expected to be between $440 million and $470 million with earnings per diluted share projected at $0.75 to $0.85.

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Pandora Names Allan Leighton as CEO

Allan Leighton

Pandora said Thursday that Allan Leighton, current chairman of the jewelry company, will succeed Bjørn Gulden as CEO on July 1.

Gulden is stepping down to join sports brand, Puma, as its new CEO. Pandora’s board of directors will recommend that Gulden remain part of the company as a board member.

Marcello Bottoli, who is currently deputy chairman, will succeed Leighton as board chairman.

Bjørn Gulden

“Pandora is a great business which is performing well, but the sports industry has always been a major part of my life, and my role at PUMA will also allow my family to remain in Germany,” Gulden, a former professional soccer player said in a statement.

Leighton added: “Bjørn, Marcello, the management team and I have worked very closely on delivering on the company strategy and the board believes that continuity in that execution and understanding of the business is key to our continued success.”

The Danish manufacturer, marketer, distributor and retailer of fine jewelry is still recovering from a very difficult 2011, which saw a sudden 70 percent drop in its stock price following a less than glowing second quarter report that year. Prior to that drop the company, which designs its popular charm bracelets and silver jewelry in Copenhagen and manufacturers them in Thailand, was the darling of jewelry retailers and the investment community as it experienced spectacular growth. The company’s IPO in 2010 raised $2.1 billion.

Gulden began at Pandora in March of 2012 and by November 2012 the company, working off a stock rebalancing program, returned to profitability in the third quarter reporting a revenue increase of 14.3 percent, year-over-year, and net profit increase of 11.4 percent. However, it wasn’t enough to save the year as revenue for 2012 was essentially flat while net profit fell 41 percent.

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Tiffany's Soft Q4 Doesn't Tarnish Sparkling Year

Tiffany & Co. said Tuesday that worldwide net sales for the fourth quarter increased 8 percent, year-over-year, to $1.2 billion. On a constant-exchange-rate basis, worldwide net sales rose 7 percent and comparable store sales rose 5 percent.

Net earnings declined 2 percent for the period, ended January 31, to $178 million, due to higher costs.

Meanwhile, worldwide net sales for fiscal 2011 rose 18 percent to $3.6 billion. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales and comparable store sales rose 15 percent and 13 percent, respectively.

Net earnings increased 19 percent to $439 million. Net earnings increased 24 percent excluding nonrecurring items, including the recent move of Tiffany’s headquarters staff in New York. Net earnings as a percentage of net sales rose to 12.1 percent, from 11.9 percent in the prior year.

“Tiffany exceeded the goals that we had set at the start of 2011 for both sales and earnings growth, although we concluded the year with softer-than-expected results,” said Michael J. Kowalski, Tiffany chairman and chief executive officer.

In its outlook for 2012, Tiffany said it expects worldwide net sales to increase by approximately 10 percent, primarily driven by sales growth in Asia-Pacific and the Americas. The New York-based company plans to open 24 stores in 2012—nine in the Americas, seven in Asia-Pacific, three in Europe—while beginning the operation of five stores in the United Arab Emirates.

The luxury retail jeweler reported annual double-digit growth in all regions. Unsurprisingly, the Asia-Pacific region reported the strongest growth.

Sales by region are as follows:

* In the Americas, sales increased 15 percent to $1.8 billion in fiscal 2011 and rose 5 percent to $605 million in the fourth quarter. On a constant-exchange-rate basis, total Americas sales rose 14 percent in fiscal 2011 and 5 percent in the fourth quarter, largely due to comparable store sales increasing 13 percent in the year and 3 percent in the fourth quarter. On that basis, comparable branch store sales in the Americas increased 11 percent in the year and 3 percent in the fourth quarter, while sales in the New York flagship store increased 20 percent for the year and 2 percent in the fourth quarter. Combined Internet and catalog sales in the Americas rose 6 percent in fiscal 2011 and declined 4 percent in the fourth quarter.

* In Asia-Pacific, sales rose 36 percent to $748 million in the full year and increased 19 percent to $225 million in the fourth quarter. On a constant-exchange-rate basis, total sales and comparable store sales rose 31 percent and 27 percent, respectively, in the year, and rose 18 percent and 13 percent in the fourth quarter, due to increased sales in most countries.

* In Japan, sales increased 13 percent to $617 million in fiscal 2011 and rose 12 percent to $204 million in the fourth quarter. On a constant-exchange-rate basis, total sales in Japan rose 3 percent in the year and 5 percent in the fourth quarter and comparable store sales increased 4 percent in both periods.

* In Europe, sales increased 17 percent to $421 million in the fiscal year and 3 percent to $142 million in the fourth quarter. On a constant-exchange-rate basis, total sales in Europe rose 12 percent in the year and 3 percent in the fourth quarter while comparable store sales increased 6 percent in the year and declined 2 percent in the fourth quarter. Throughout the fourth quarter and year, sales growth in Continental Europe was relatively stronger than results in the U.K., the company said.

Tiffany currently operates about 247 stores (102 in the Americas, 58 in Asia-Pacific, 55 in Japan and 32 in Europe.

Other sales declined 5 percent to $51 million in the fiscal year and fell 22 percent to $12 million in the fourth quarter due to declines in wholesale sales of rough diamonds in both periods as well as lower wholesale sales of finished products to independent distributors in the fourth quarter.

Other financial highlights:

* Gross margin (gross profit as a percentage of net sales) of 59.0% in the fiscal year compared with 59.1% a year ago, reflecting both higher product costs and shifts in product sales mix toward higher-priced jewelry that achieves a lower gross margin being largely offset by sales leverage on fixed costs. Gross margin in the fourth quarter was 60.4 percent, versus 60.9 percent in the prior year for generally similar reasons except for a lack of sales leverage on fixed costs.

* SG&A (selling, general and administrative) expenses increased 18 percent in the fiscal year and 10 percent in the fourth quarter, with both increases affected by nonrecurring costs related to the relocation of Tiffany's New York headquarters staff. Excluding the nonrecurring costs in all periods, SG&A expenses rose 16 percent in the fiscal year and 11 percent in the fourth quarter primarily due to increased store occupancy, labor and marketing costs.

* The company repurchased approximately 2.6 million shares of its Common Stock in the fiscal year at a total cost of $174 million, or an average cost of $66.23 per share. In the fourth quarter, the Company spent $35 million to repurchase approximately 525,000 shares at an average cost of $67.26 per share. At January 31, 2012 approximately $218 million was available for future repurchases under the currently authorized plan which expires in January 2013.

Survey: Valentine’s Day Jewelry Sales Expected to Sparkle

Jewelry sales for Valentine’s Day are expected to total nearly $1.5 million, a year-over-year growth of 11.3 percent, according to industry research firm IBISWorld.

“Luxury spending is already on the rise, so it will come as no surprise that bracelets, earrings, necklaces and rings will be the go-to gift choice for many Americans,” said IBISWorld retail industry analyst Nikoleta Panteva. “This year, IBISWorld expects jewelry to make up 7.8 percent of all Valentine’s Day sales, making its way back to pre-recessionary levels.”

Only flowers, at 16.8 percent, is expected to grow at a more rapid pace, according to IBISWorld, which tracks sales in seven categories, including greeting cards, candy, dining out, clothing and lingerie, and romantic getaways.

Sales for the romantic holiday are expected to grow in all categories, making the day pretty sweet for retailers, IBISWorld said. Consumers are forecast to spend 5.8 percent more on Valentine’s Day purchases in 2011 than 2010, totaling $18.6 billion or about $125 per person.

Zale Corp. Profit Lauded as a ‘Turning Point’ for the Company

Zale Corp. said Wednesday that its year-over-year net income in the fiscal second quarter rose 400 percent to 27.2 million, compared with $6.7 million for the second quarter of the prior fiscal year.

Revenues for the quarter ended January 31, increased 7.6 percent to $626 million, the Dallas-based jewelry and diamond retailer. Same store sales for the period increased 7.9 percent, compared to a decrease of 11.2 percent during the comparable period in the prior year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, same store sales increased 7 percent for the quarter.

The company achieved gross margin on sales of 50.3 percent for the quarter, compared to 49.8 percent in the comparable quarter last year.

“Our financial performance for the critical second quarter reflects the collaborative efforts of our total organization focusing on one objective – delivering a successful holiday,” said Theo Killion, Zale Corp. CEO. “In doing so, we’ve taken an important step towards our goal of returning to profitability.”

“This quarter marked a turning point for the company as we returned to positive same store sales,” added Matt Appel, Zale Corp. CFO. “We are pleased with the results to date from our turnaround initiatives.”

Selling, general and administrative expenses were $258 million, or 41.2 percent of revenues, in the quarter, compared to $252 million, or 43.3 percent of revenues, in the same period last year. Its operating income for the quarter was $44 million compared to an operating loss of $3 million in the prior year quarter. Operating margin improved $46 million, or 750 basis points, to 7 percebt for the, compared to negative 0.5 period in the same period last year.

The company incurred income tax expense of $6 million for the period, compared to a benefit of $12 million in the comparable period in the prior year.

Inventory as of January 31, stood at $777 million, an increase of approximately $39 million from Jan. 31, 2010, in anticipation of the Valentine’s Day selling period. As of January 31, the company had outstanding debt of $385 million, compared to $368 million as of January 31, 2010.

Zale Corp. is a leading specialty retailer of diamonds and other jewelry products in North America, operating approximately 1,870 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corp.'s brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.

Report: 2010 Jewelry Sales Up 7.7%

Led by strong consumer demand during the holiday season, U.S. jewelry sales rose 7.7 percent, to a record $63.4 billion, in 2010, according to a report from the Jewelers Board of Trade, based on U.S. Department of Commerce data. The uptick follows two consecutive years of declines, dropping 2.7 percent in 2009 and 2.4 percent in 2008, as Americans cut back on discretionary spending, the Chicago Tribune reports.

With the price of gold is trading at record prices, jewelers have come up with creative designs aimed at keeping price tags down. Designers, as reported on JNN, are fashioning smaller, lighter pieces that require less solid gold, relying on twists, lace designs and cutouts. 

“I find that people continue to want to wear gold but we just need to adjust the designs to the new circumstances," Pittsford, N.Y.-based goldsmith and jewelry artist, Barbara Heinrich recently told JNN. For example, 18k cuff bracelets (pictured left) are lighter than they have been in the past but because of the superior fabrication process, they remain sturdy. 

One company, Fope, developed a process that combines silver with palladium for a new line of luxury bangles (pictued left).

The luxury segment has reported the strongest sales by far. For example, Tiffany, in January raised its profit forecast for the year, adding it will accelerate store openings in 2011.

Meanwhile, Signet Jewelers and Zale Corp., which own mid-tier jewelry chain, reported strong sales for the November-December holiday period.

Meanwhile, both J.C. Penney Co. and Sears Holdings Corp. debuted new bridal jewelry collections at their department stores this month in hopes of capturing sales leading up to Valentine's Day, the second-biggest holiday in the jewelry trade, the newspaper reports.

Jewelry retailers, however, are not out of the woods, the newspaper reports. Jewelry sales spiked 10.4 percent in December from the same period a year ago, but then declined 3.3 percent in January, according to MasterCard Advisors' Spending Pulse, an indicator based on MasterCard payments coupled with estimates for other payment forms, including cash and checks.

J.P. Morgan analyst Brian Tunick estimated in a Feb. 1 report that more than 2,750 jewelry stores have shuttered since the recession and predicts that closings will continue, the newspaper reports.

Zale Corp. Holiday Comps Up 2.3%; Holiday Sales Total $567 Million

Jewelry and diamond retailer, Zale Corp., said Thursday that same store sales increased 2.3 percent for the combined months of November and December 2012, encompassing the entire holiday selling period. This increase falls short of the 5.9 percent rise in same store sales for the same period last year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, comparable store sales increased 1.6 percent for the holiday selling period, compared to an increase of 6.2 percent in the prior year period.

Revenues for the two-month period were $567 million, an increase of $3 million compared to $564 million in the same period last year. The increase in revenues is primarily due to the same store sales growth partially offset by revenues associated with the net decrease of 50 stores compared to last year.

“This holiday season, we focused on driving bottom line improvement,” said Theo Killion, Zale Corp. CEO. “Our comp performance, combined with an expected 100 basis point operating margin improvement, brings us closer to our goal of achieving positive net income for the fiscal year.”

Holiday selling period same store sales details are as follows:

* Zales branded stores, consisting of Zales Jewelers and Zales Outlet, posted an increase of 3.1 percent, compared to an increase of 10 percent in the same period last year. U.S. fine jewelry brands including regional brand, Gordon’s Jewelers, posted an increase of 2.2 percent. In the same period last year. U.S. fine jewelry brands same store sales rose 9 percent for the 2011 holiday season.

* Canadian Fine Jewelry brands, consisting of Peoples Jewellers and Mappins Jewellers, posted a same store sales increase of 2.7 percent. This increase follows a 0.2 percent rise in the same period last year. At constant exchange rates, Canadian Fine Jewelry brands posted a comparable store sales decline of 0.7 percent, compared to an increase of 1.7 percent in the prior year period.

* Piercing Pagoda, Zale Corp.’s kiosk Jewelry business, posted a same store sales increase of 1.7 percent, compared to a declined 2.1 percent for the 2011 holiday season.

In its outlook for the quarter ending January 31, Zale Corp. said it expects gross margin to be in line with the prior year quarter’s gross margin of 50.5 percent. Operating margin is expected to be approximately 7.5 percent, or 100 basis points higher than the prior year quarter, primarily as a result of improved leverage on selling, general and administrative expenses.

As previously announced, the company expects to achieve positive net income for fiscal year 2013.

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Look for ‘Crazy Warren’ Buffett Selling Jewelry at Borsheims

Susan Jacques, Borsheims president and CEO, shows Warren Buffett the special shareholder price of piece of jewelry during last year’s Berkshire Hathaway shareholders weekend.

Borsheims jewelry store is one of the most popular stops for Berkshire Hathaway investors during the company’s annual weekend-long shareholders meeting. The retailer should expect to see greater crowds this year as Warren Buffet will once again be making the rounds as a jewelry salesman for the weekend.

Buffett made the announcement in his annual letter to Berkshire Hathaway shareholders, released Saturday. It will be the second consecutive year that the “Sage of Omaha” will be selling jewelry for the shareholders weekend—which attracts more than 30,000 Berkshire Hathaway shareholders, media members and other guests. Borsheims is a subsidiary of Berkshire Hathaway.

“On Sunday (May 6, 2012) around 2 p.m., I will be clerking at Borsheims, desperate to beat my sales figure from last year,” Buffett wrote. “So come take advantage of me. Ask me for my ‘Crazy Warren’ price.” 

“We are thrilled to have Mr. Buffett back among our sales staff. He set records last year in his brief stint behind the counter and we expect a longer stay from Mr. Buffett this year,” Borsheims wrote on its blog.

The jeweler was founded in 1870 and has been a subsidiary of Berkshire Hathaway since 1989. The store covers more than 62,500 square feet after its 2006 remodel, and maintains an inventory that includes more than 100,000 pieces. It also has a very large catalog and website business.

Buffett, if course, is the primary shareholder, chairman and CEO of Berkshire Hathaway and is widely regarded as one the most successful investors in the world.