Sales at Neiman Marcus and BG Stores Up 6.4% in November

In another sign of a good holiday season for the U.S. luxury market, Neiman Marcus Inc. reported that comparable revenues in its Neiman Marcus and Bergdorf Goodman stores increased 6.4 percent in November. Jewelry and designer handbags were among the strongest categories.

Total sales for all Neiman Marcus Inc. operations in November increased 5.8 percent to $322 million. The company said revenue growth trends were the strongest in the company’s stores in the Southeast, New York City and Texas. Comparable sales for the month increased 5.5 percent to $321 million.

Comparable revenues at Neiman Marcus Direct, which include online and print catalog operations under the Neiman Marcus, Horchow and Bergdorf Goodman brands, in the four-week November period increased 2 percent. The top selling merchandise categories in the Direct Marketing segment included women’s fine apparel and shoes, accessories and men’s.

Affluent Shoppers are Spending Less on Luxury

Affluent consumers continue to express pessimism when it comes to the U.S. economy and it’s affecting how they shop, according to Unity Marketing's Luxury Consumption Index.

The quarterly survey of 1,364 affluent luxury consumers (avg. income $298,300) dropped 6.2 points to 72.1 points in the third quarter with these high-net worth individuals spending 1.4 percent less than they did in the second quarter.

“Luxury consumers started 2010 with a feeling of optimism that the worst of the economic turmoil was over,” said Pam Danziger, president of the Steven, Pa.-based marketing research firm and author of the upcoming book, Putting the Luxe Back in Luxury. “But through the course of the year, reality hasn't lived up to those expectations, so we have seen a retreat of the LCI throughout the year. Lower levels of affluent consumer confidence are playing out in terms of reduced of spending on luxuries.”

Danziger said the survey reported declines in expenditures in most of the 22 categories of luxury goods and services.

Among the findings in the third quarter Luxury Tracking Study:

* Spending on luxury declined 1.4 percent overall in the third quarter, when compared to the second quarter. However, ultra-affluents (top 2 percent of U.S. households with incomes over $250,000) cut their luxury spending by 11 percent for the period. Luxury consumer spending dropped from $31,665 on average in the second quarter to $31,225 in the third quarter. “This pull back … will have the strongest impact on the heritage luxury brands at the high end of the luxury market,” Danziger said. “The good news for luxury marketers is that luxury consumers spent 33 percent more this year as compared with last year. But marketers should prepare for another tough fourth quarter as the affluent look once again for more bargains and discounts.”

* Personal electronics will be the most popular holiday present for these consumers. The only luxury goods category posting quarter-to-quarter growth was personal electronics, including laptop computers, GPS, cell phones, MP3 players and eBook readers.

* More affluent consumers purchased luxury in the third quarter, even though they spent less overall. Luxury goods and services categories that captured a greater share of affluent shoppers this quarter included luxury clothing and apparel, wine and spirits, fine dining, entertainment and travel. “What the data says about the third quarter is that in these five categories marketers attracted a greater share of customers, but they were not able to convert them into higher-spending customers,” Danziger said.

* Luxury consumers traded down to more mass brands in search of value. For example, more ultra-affluent shoppers frequented Costco (35.5 percent) and Target (36.1 percent) this quarter than Neiman Marcus (21.3 percent).  

* In the fashion boutique sector, Ann Taylor (17.6 percent), Banana Republic (16.6 percent) and Ann Taylor Loft (16.1 percent), were patronized more by ultra-affluent shoppers this quarter than traditional 'luxe' brands such as Chanel (10.8 percent), Louis Vuitton (11 percent) or Coach (11.8 percent).

LVMH Watches and Jewelry Up 29%

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury group, said Thursday that revenue for its Watches & Jewelry business group grew at a record pace of 29 percent in the first nine months of 2010 with many of its iconic brands leading the way. Organic growth, when currency fluctuations were not taken into account, was 22 percent. This business group outperformed all other product categories for the international luxury retail conglomerate.

TAG Heuer, which has been expanding worldwide, has benefited from the new models launched for its 150th anniversary celebration. Hublot gained market share due to the “excellent performance” of its Big Bang and King Power lines, the company said. Zenith’s new collections were “very favorably received.” The jewelry brands Chaumet, Fred and De Beers also reported strong growth.

The company as a whole achieved revenue of €14.2 billion ($20 billion) in the first nine months of 2010, a year-over-year increase of 19 percent, LVMH said. Organic revenue growth was 14 percent for the period. Without releasing exact numbers, the company said Asia, Europe and America performed well.

In addition, all its product categories achieved double-digit growth. The results are as follows:

* Wine & Spirits, 22 percent;
* Fashion & Leather Goods, 20 percent
* Perfumes & Cosmetics, 14 percent
* Selective Retailing, 17 percent

In its outlook, the company said it will continue its focus on “innovation and targeted geographical expansion in the most promising markets.”

Strong Showing for Retail Stores in September

A number of department stores posted strong gains for the month of September, outperforming other retails segments.

For example, Neiman Marcus reported that its same store sales rose 4.7 percent during the month against the same period last year. Jewelry, women’s shoes, handbags and men’s clothing saw big sales gains. Stores in California, Texas, the south-east and New York were the top performing for the period.

Saks reported a 6.5 per cent increase in same store sales, highlighting strength in a similarly broad range of categories. Nordstrom said its same store sales rose 7.5 percent and that transactions at its main stores had increased for the 13th month in a row.

Mid-market retailers also did well for the month. Macy’s same store sale rose 4.8 percent, JC Penney was up 5.1 percent and Kohl’s increased 3 percent in September.

Teen and youth retailers also delivered a generally strong month, with same store sales at Abercrombie & Fitch up 13 percent.

Harry Winston Sales Up While Profits Decline

Harry Winston saw a 98% increase in retail sales.

Harry Winston Diamond Corp. saw its luxury retail sales nearly double along with a modest increase in rough diamond sales, but it wasn’t enough to lift profits for the Toronto-based company.

The company said Wednesday that second quarter consolidated sales increased 44.7 percent percent to 222.4 million year-over year, resulting in a 6 percent increase in gross margin to $72.2 million and an operating profit of $23.1 million, compared to an operating profit of $29.9 million in the comparable quarter of the prior year. Consolidated EBITDA was $43.8 million compared to $49.4 million in the comparable quarter of the prior year.

Despite the sales increase, net profits fell 23 percent to $10 million.

Harry Winston consists of two businesses. The first supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company, however, is internationally known for its second business as a premier diamond jeweler and luxury timepiece retailer with salons in key locations throughout the world, including New York, Paris, London, Beijing, Tokyo, Hong Kong and Beverly Hills.

The luxury brand segment reported a 98 percent increase in sales to $132.8 million for the period, year-over-year. At constant exchange rates, the increase was 81 percent. Included in the second quarter was $55.6 million of high-value transactions, which generally carry lower-than-average gross margins. Operating profit was $6.8 million for the quarter compared to $2.3 million in the same quarter of the prior year. EBITDA for the luxury brand segment was $10.1 million compared to $5.5 million in the comparable quarter of the prior year.

“Global retail demand, especially in the emerging economies such as China and India, has delivered both strong retail sales growth and strong rough diamond prices. Seeing through the effect of a small number of high-value, lower margin sales, our own jewelry and timepiece business shows solid growth in both sales and margin in the core bridal, timepiece and designed jewelry segments,” said Robert Gannicott, Harry Winston chairman and CEO.

Meanwhile, sales from its mining segment increased 3 percent to $89.6 million for the second quarter, year-over-year, resulting primarily from a 41 percent increase achieved in rough diamond prices, offset by a 27 percent decrease in volume of carats sold. The mining segment recorded operating profit of $16.3 million compared to $27.6 million in the comparable quarter of the prior year. EBITDA for the mining segment was $33.7 million compared to $44 million in the comparable quarter of the prior year.

“The market price increase in rough diamonds has more than compensated for two complete sales versus three in the comparable prior year quarter as well as the lower quality diamonds mined from the upper part of the current open pit,” Gannicott said

“Looking forward we continue to see strong global jewelry and timepiece demand from China while Japan and the Middle East improve and the U.S. remains subdued. On this basis we expect to continue to grow our own jewelry and timepiece business despite challenging economic conditions in the U.S. and Europe. Although we do not predict further near-term rough diamond market price increases we do see our own rough diamond sales price already improving.”

Harry Winston Q1 Consolidated Sales Up 26%

Harry Winston salon in Paris

Harry Winston Diamond Corp. seems to have the best of both worlds with its businesses in diamond mining sector and as a luxury jewelry and watch retailer. Both market segments have shown strong growth over the past year and this is continuing as the Toronto-based company reported Wednesday that consolidated sales increased 26 percent for the first quarter of fiscal year 2012. The increase at constant exchange rates was 22 percent.

Luxury brand sales, through its network of salons that sell luxury jewelry and watches in key cities throughout the world, increased 26 percent to $81.9 million for the quarter, ended April 30, primarily driven by stronger high jewelry sales in the United States and higher timepiece sales. The increase at constant exchange rates was 20 percent.

In addition, Harry Winston, which supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine in Northwestern Canada, said mining sales increased 27 percent to $62 million, primarily due to higher rough diamond pricing versus the comparable prior year period. Rough diamond output, for the period ended March 31, dropped to 500,000 carats compared to 600,000 carats for the same period last year.

“This quarter's results reflect improving rough diamond prices combined with increasing sales and profit for the luxury brand segment. Both sides of our diamond business are performing well as we continue to achieve premium rough diamond prices and execute our luxury brand strategy,” said Robert Gannicott, Harry Winston Chairman and CEO.

To shore up its stockpile of polished diamonds it uses for luxury jewelry lines and to maximize the continued rise in prices for what many believe is a dwindling resource; Harry Winston in May announced that it is involved in the establishment a polished diamond investment fund. The fund is being managed by Diamond Asset Advisors AG, a Zurich based advisor with a background in both the diamond and financial services sectors. The fund will be structured as a limited partnership, of up to $250 million, offering institutional investors direct exposure to the wholesale market price of polished diamonds.

“Our recently announced relationship with Diamond Asset Advisors in the creation of a polished diamond acquisition fund represents an innovative way for the company to support its luxury brand growth objectives,” Gannicott said.

Other first quarter highlights, include:

* Consolidated EBITDA (earnings before interest taxes depreciation and amortization) in the first quarter of Fiscal 2012 increased 51 percent to $25 million, showing strength in both segments of the business, the company said. In the same period, the mining segment EBITDA increased 48.5 percent to $17.6 million and the luxury brand segment EBITDA increased 57.3 percent to $7.3 million.

* Consolidated operating profit was $4.7 million or double the operating profit of $2.3 million from a year ago, with mining operating profits down $300,000 and luxury brand profits up $2.7 million versus the prior year. Operating profit benefited from higher rough diamond prices and higher high-end jewelry and timepiece sales, the company said.
 
* Consolidated net profit attributable to shareholders for the first quarter was $3.6 million or $0.04 per share compared to net profit attributable to shareholders of $2.1 million or $0.03 per share in the comparable quarter of the prior year.

Neiman Marcus Q3 Sales Up 10%, Net Earnings Up 150%

Neiman Marcus reported a year-over-year increase in revenues of 9.9 percent to $983.8 million for its fiscal third quarter. Comparable revenues increased 9.7 percent. Operating earnings for the period ended April 30 increased 45 percent year-over-year to $123.2 million.

The Dallas-based luxury retailer said Friday that net earnings totaled $46.2 million for the 13-week period compared to $18.5 million in the prior year, a staggering 149.7 percent increase. EBITDA increased 23 percent to $169.9 million for the period.

For the 39 weeks ended April 30, the company reported total revenues of $3.08 billion compared to $2.87 billion in the prior year. Comparable revenues increased 7.3 percent. The Company recorded operating earnings for the 39 weeks ended April 30, 2011 of $312.3 million compared to $227.3 million for the comparable period a year ago, an increase of 37 percent.

The company’s year-over-year net earnings rose 200.9 percent to $93 million for the 39-week fiscal period, ended April 30. EBITDA increased 18 percent for the period to $457.2 million.

Fewer People Spent More on Luxury Jewelry

Luxury jewelry spending increased 3 percent, year-over-year, in the third quarter of 2010, according to American Express Business Insights. The average transaction size for luxury jewelry purchases increased 6 percent while transaction volume for the category fell by 3 percent.

These are much lower numbers than what was reported by the Spend Sights Report—Luxury Retail survey for the prior two quarters. For example, spending on luxury jewelry increased by 18 percent in March and 17 percent in April, while increases for the last four consecutive months was below 6 percent—including no increase at all in September.

Males were responsible for 71 percent of consumer luxury jewelry purchases and consumers over 46 years of age were responsible 54 percent of total jewelry spending—according to the report, which tracks furniture and home furnishings, apparel and accessories, jewelry and department stores.

Shoppers under the age of 35 made up 25 percent of total luxury jewelry customers in the third quarter, slightly higher than the year prior at 21 percent.

Overall, the luxury retail sector continued to show improvement as consumer confidence slowly restores, the report states.

According to the report, furniture and home furnishings posted the most significant year-over-year gains of the third quarter with a 13 percent increase, with department stores were not far behind at 10 percent. Overall spending for apparel and accessories for the period rose by 5 percent.

Individual consumer spending was up across all luxury retail sectors and showed an increase of 12 percent in furniture & home furnishings. Small and large businesses, however, continued to hold back and decreased spending in this category by 2 percent and 7 percent, respectively.