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Rapaport TradeWire February 27, 2015
Feb 26, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Feb. 27, 2015
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High hopes for Hong Kong show with large quantity of diamonds on offer, despite severe 30-35% cutback in manufacturing and 50% decline in value of new production. Liquidity is tight but prices holding steady as sellers await outcome of HK show and possibility that shortages will stabilize the market. Rough trading improves at Antwerp rough fair as De Beers reduces overall prices by an estimated 2% at Feb. sight. Dominion’s 4Q sales +3% to $241M, Ekati production +70% to 821,000 carats. Lucara’s 4Q revenue +20% to $71M, loss of $17M vs. profit of $21M a year earlier. Sarine’s 4Q revenue +10% to $18M, profit -13% to $3.9M. China’s 2014 polished diamond imports +31% to $2.2B.
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RapNet Data: Feb. 26
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| Diamonds |
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1,470,250 |
| Value |
$8,064,959,730 |
| Carats |
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1,407,640 |
| Average Discount |
-28.46% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
A wide range of rough diamonds was offered during Antwerp's 'Rough Diamond Days' trading event, so everyone could find what they were looking for. But above all, the personal contact between traders boosted their level of confidence, which is something that many dealers can use in these difficult times.
Freddy Inzlicht | Antwerpsche Diamantkring
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RETAIL & WHOLESALE
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Online Jewelry Sales Growth Continues
IBISWorld estimated that revenue from the ecommerce and online auctions in the U.S. increased at an annualized rate of 8.9% over the past five years to $314.9 billion. But the growth by product category is uneven. IBISWorld estimated that jewelry store sales grew only 3.5% during the past five years, but even that increase was higher than all other in-store categories -- such as clothing, groceries, liquor and auto parts, flowers and others. Meanwhile, online jewelry sales have jumped nearly 9% at an annualized rate since 2010.
Looking ahead, IBISworld anticipates that jewelry store sales will increase about 3% at an annualized rate through 2020, while online jewelry sales could jump almost 6%.
The group concluded that disparity in growth rates across products is telling of how new technology has disrupted retail. Online grocery sales have grown at an estimated annualized rate of 16.7% during the past five years; however, total sales pale by comparison to those in a store. In contrast, online camera and camcorder sales have grown at only 0.9% during the past five years, but these products have reached maturity online. Similarly, a greater number of men’s clothing sales are being completed online relative to overall men’s clothing sales, although online sales of men’s clothing are increasing rapidly. Industries that are most likely to continue to be disrupted by online sales are going to be those that maintain high levels of growth.
Generally speaking, ecommerce growth is going to slow moving forward as it reaches full maturity. Still, growth of a number of online channels is expected to continue to exceed store sales across a wide variety of industries including jewelry. This clearly means more disruption to come.
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Crossworks, Osigem Partner for 'Ideal Square'
Crossworks Manufacturing Ltd. partnered with Osigem to launch the "Ideal Square," a square-cut diamond that exhibits the hearts and arrows pattern. Specifically for the launch in Milan, Italy, Osigem created the Forever Unique jewelry collection that was designed to enhance the hearts and arrows concept of Crossworks' Ideal Square. The collection was designed by Chiara Colombani, a winner in the De Beers Diamonds: Nature's Miracle, and will be offered through premier jewelry stores across Italy by Osigem.
In other news, Crossworks named Lisa Levinson as the country manager for Forevermark in the U.K. and Ireland. Crossworks, which is a Forevermark partner, stated that Levinson will oversee the launch of Forevermark in those countries and will focus on developing the sales and marketing with Forevermark retail partners.
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Elizabeth Taylor Trust Sues Christie's
Co-trustees for The Sothern Trust sued Christie's for wrongful action in connection with the sale of Elizabeth Taylor's jewelry and personal items. Proceeds from the sale were to benefit the Trust and The Elizabeth Taylor AIDS Foundation. The plaintiffs charged Christie's with violating its own policies, canceling sales of auction items, refusing to return unsold merchandise and failing to remit payment to the Trust for items that sold. Christie's held the sale in December 2011, and the jewels alone fetched more than $137 million.
Christie's sold the "Taj Mahal" heart-shaped diamond and jade pendant by Cartier to an anonymous bidder for $8,818,500 and remitted $7.8 million to the Trust. But months later, the buyer allegedly demanded that Christie's cancel that sale and return the purchase price, claiming the diamond was not from the Mughal period. But the plaintiffs argued that Christie's never promoted the diamond being from a certain period; however, since the buyer was a VIP client, Christie's abandoned its own policy and provided a refund, in turn demanding the Trust return $7.8 million. The Trust refused, citing its consignment agreement with Christie's.
In this case, the plaintiffs argued that the buyer's contention fell outside of Christie's warranty conditions and diverted from usual policy and practice. Furthermore, Christie's has withheld payment and the return of certain items in "an attempt to strong-arm" the Trust into returning the diamond's proceeds. While Christie's remains in possession of the diamond, it withheld payment from the sale of a Bulgari diamond ring, which fetched $2.9 million. The Trust demanded the return of that ring, but Christie's claimed that it was in possession of a new owner.
The Trust alleged, too, that it had not received payment for a Ciner necklace, Girandole ear clips, a Tulle evening gown, a Vicky Tiel caftan and a Valentino handbag. The Elizabeth Taylor AIDS Foundation had not also received payment for autographed books and box sets of books, according to the plaintiffs.
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Sarine's Profit -13%
Sarine Technologies reported that sales grew 10% year on year to $18.3 million during the fourth quarter that ended on December 31. Sarine delivered seven new Galaxy systems during the quarter. As a result, 190 Galaxy systems were installed and running as of December 31. Profit declined 13% to $3.89 million due to higher operating expenses, a slightly higher income tax rate and higher finance expenses due to the depreciation of the Israeli shekel against the U.S. dollar.
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Lab Rebrands as AnchorCert Analytical
Assay Office Birmingham Analytical Laboratory has been rebranded as AnchorCert Analytical to mark expansion into new sectors, alongside its traditional links with the fine- and costume-jewelry business. Anchorcert Analytical continues to analyze all precious metals; however, the scope of services expanded to include nickel testing. New equipment and the addition of qualified specialists have resulted in a service offering in testing compliance with E.U., U.S. and Canada legislation for many consumer product safety regulations. These relate to the content or release levels of toxic elements such as lead, cadmium, Chromium VI and other potential carcinogens including azo dyes, formaldehyde and phthalates, to name a few. AnchorCert Analytical offers UKAS accredited chemical testing to ensure compliance with the REACH Regulation, RoHS, the Toy Safety Regulation and U.S. CPSIA standards among others.
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Levinson Ends Life at 60
Jeweler Mark Levinson of Florida took his life this week, according to the Broward County Medical Examiner’s Office. Levinson left a suicide note and died of a single gunshot wound to his head in a vacant yard adjacent to the family's home in Fort Lauderdale. Levinson, along with his wife, Robin, own Levinson Jewelers and have been prominent figures in South Florida across social and charitable networks.
Levinson Jewelers was dragged into the Scott Rothstein Ponzi-scheme criminal investigation, but Levinson cooperated with authorities and was never charged with any misconduct. Rothstein, who is serving 50 years in prison for defrauding investors of $1.2 billion, had purchased $10 million worth of jewelry from the store before his scheme collapsed in 2009. Still, Levinson Jewelers was sued by the bankruptcy trustee for Rothstein’s former law firm for millions of dollars. In 2013, the retailer reached a “compromise” settlement for $650,000.
The family has requested privacy.
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Gem-A Presents Hatleberg Salon
Gemstone connoisseurs were delighted by an evening salon hosted by noted gemstone cutter and expert John Hatleberg at his New York City studio where he showed a group of gemstone enthusiasts some of his gem art and explained the properties of unique stones as well as the inspiration behind his work. The evening was presented by the Gemmological Association of Great Britain (Gem-A), as part of a series of events in the U.S.
Best known for cutting replicas of some of the most historic diamonds in the world, Hatleberg gave an in-depth explanation of the process that is used to make these replicas. In addition, he has created many works of art from gems including a painting that recreates Van Gogh’s Irises using crushed gemstones as “paint” and sculptures that showcase gems. Hatleberg also showed some colored gemstones that he has cut as well, while explaining the choices he made as a cutter to bring out the unique properties of each stone and to showcase the art of the lapidary.
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Signature Show Attracts 7,000 Buyers
The eighth edition of the Signature show by India's Gems & Jewellery Export Promotion Council (GJEPC) hosted 1,100 booths and 7,000 buyers this past week as it is clearly becoming the preferred show for retailers on the hunt for new designs and trends. Vipul Shah, the chairman of the GJEPC, noted that each year, designs and the quality of the products are improving, therefore attracting more retailers to the show.
Colin Shah, the managing director of Kama Schachter, confirmed that participating in the Signature show is a staple of the group's trade show calendar. Shah said, “Talking about the business generated, to be honest, we were skeptical but hopeful that the show should reflect positive market sentiment and that is exactly what happened.”
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Marcato Capital Rips Into Sotheby's
Hedge fund Marcato Capital Management accused Sotheby's of ignoring growth opportunities and demanded both an immediate $500 million share repurchase and the replacement of the company's chief financial officer. Mick McGuire, the founder of Marcato, wrote, "Despite our dialogue with you and other members of the board, a substantial portion of Sotheby's invested capital continues to earn a poor return or, worse yet, earns no return at all. This willful neglect on the part of both management and the finance committee of the board must end urgently."
In response, Sotheby's reiterated its determination to defer capital allocation decisions until a new CEO has been selected. Sotheby's lead independent director, Domenico De Sole, said "but our immediate priority is selecting a new CEO and determining a strategy to increase shareholder value. We will address capital allocation based on our strategy and the resulting capital needs. Further, good governance requires that the new CEO be involved in something as important as our capital allocation policy."
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Take Proactive Measures to Surprise Customers
Does your jewelry store respond to customer problems as they arise? While that approach might be satisfactory -- it is simply not enough as well as being unsurprising and uninspiring, according to John Tschohl, the president of the Service Quality Institute. Jewelers must work toward delighting customers rather than running around putting out fires. Using strategic examples from Amazon.com, Tschohl cited how the online retailer is "internally driven" to improve services through added benefits and features, adjust prices to compete and invest capital to thwart reacting to competitive forces.
For example, when an item is pre-ordered on Amazon, the company guarantees the lowest price between the order time and the end of the day of the product release. While this proactive approach is more expensive to Amazon, it surprises, delights and earns trust with the customer. Tschohl said that proactive retailers have a significant competitive advantage. They are flexible, adaptable and focused on continually improving their customer service, productivity, efficiency and workplace environment.
Proactive organizations are a step ahead of the game and change long before risks materialize. He urged retailers to ask customers for feedback to determine their needs and to identify store weakness in order to make corrections. Announce mistakes before customers do it for you, which gives the brand an opportunity to prove its trustworthiness. Reward returning customers with discounts and offers to build goodwill and loyalty, according to Tschohl.
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Fabergé Reveals 'Pearl Egg'
Fabergé crafted an extraordinary, one-of-kind egg objet d'art in collaboration with the Al-Fardan family, a renowned collector of pearls. The Fabergé Pearl Egg is the first egg created in the Imperial Class since 1917 and it draws inspiration from the formation of a pearl within an oyster. The painstakingly crafted mother-of-pearl exterior opens to reveal a unique grey pearl of 12.17-carats, sourced from the Arabian Gulf and exhibiting exceptional purity and a highly unusual shade of grey.
The egg embodies 139 fine, white pearls with a golden luster, 3,305 diamonds, carved rock crystal and mother-of-pearl set on white and yellow gold. Each pearl adorning the Fabergé Pearl Egg was hand-selected by Hussain Ibrahim Al-Fardan from his private collection. An ingenious mechanism enables the entire outer shell to rotate on its base, simultaneously opening in six sections to unveil its treasure.
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LAGOS Promotes Exec Team
Jewelry brand LAGOS announced several management changes as part of its strategic focus on continued growth. The company named its founder, Steven Lagos, as the chairman and creative director; Chris Cullen was promoted to the position of CEO; Isabelle Scarchilli was promoted to vice president of marketing; Amanda Willinger was named vice president of digital and ecommerce and Diana Nichols was appointed to a new position as sales director. LAGOS was founded in 1977 in Philadelphia.
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MINING
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Dominion Diamond's Sales +3%
Dominion Diamond Corp. reported that sales rose 3% year on year to $240.6 million in the fourth quarter that ended January 31. However, the company noted that sales were below expectations since diamond prices softened during the period. Profit will be reported later. The company sold 897,000 carats from the Ekati mine for $159.1 million, or $177.40 per carat. Dominion’s 40% share of production from the Diavik mine resulted in the sale of 778,000 carats for $81.5 million, or $104.80 per carat. Revenue totals did not include $11.5 million worth of rough that was sold from the Misery satellite and Misery northeast pipes. Fourth quarter production at Ekati rose 70% to 821,000 carats, while Dominion’s Diavik production fell 28% to 628,000 carats. Dominion’s total production increased 7% to 1.449 million carats during the period.
During the fiscal year, total production grew 31% to 5.98 million carats. Ekati’s production rose 91% to 3.158 million carats, while Diavik production declined 3% to 2.822 million carats. Group sales grew 22% to $915.7 million for the year, excluding $42.5 million worth of sales generated from diamonds processed from the Misery pipes.
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Lucara Records a Loss
Lucara Diamond Corp. reported that revenue rose 20% year on year to $70.5 million in the fourth quarter of 2014, even as the rough market softened during the period. Diamond sales grew due to higher prices and despite a 6% drop in the volume of diamonds that were sold, at 104,405 carats. Lucara declared a loss of $16.8 million compared with a profit of $21.3 million a year earlier due to an impairment and restoration charge following the divestment of the Mothae mining project in Lesotho.
The average value of Lucara's rough diamonds increased 56% to $675 per carat. All of Lucara’s diamonds came from the Karowe mine in Botswana, which is the company's sole producing mine. Price growth was driven by higher market prices compared with the same quarter in 2013, while Lucara also sold a greater volume of diamonds larger than 10.80 carats.
For the full year, Lucara’s revenue grew 47% to $265.5 million, while profit fell 30% to $45.7 million. Lucara's production fell 2% to 430,000 carats.
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STATS
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China
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2014 $Mil. |
%Chng. |
| Polished imports |
$2,240 |
31% |
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| All diamond transactions |
$5,130 |
19% |
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ECONWATCH
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Diamond Industry Stock Report
Birks (-7%) continued to slide, but JCP (+12%) pleased investors with a stronger fiscal year; Far East shares were lower, led by Luk Fook (-6%), but European shares were slightly higher as Richemont (+2%) led gains. Indian shares all lower except for Goldiam (+1%) and Vaibhav (+3%). Mining shares were mostly higher except for ALROSA (-7%), Lucara (-6%) and Stornoway (-1%). View the detailed industry stock report.
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Feb. 26 |
Feb. 19 |
Chng. |
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| $1 = Euro |
0.890 |
0.880 |
0.010 |
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| $1 = Rupee |
61.73 |
62.07 |
-0.3 |
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| $1 = Israel Shekel |
3.96 |
3.84 |
0.12 |
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| $1 = Rand |
11.54 |
11.68 |
-0.14 |
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| $1 = Canadian Dollar |
1.25 |
1.25 |
0.00 |
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| Precious Metals |
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| Gold |
$1,209.10 |
$1,207.70 |
$1.40 |
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| Platinum |
$1,171.00 |
$1,168.00 |
$3.00 |
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| Stock Indexes |
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Chng. |
| BSE |
28,746.65 |
29,462.27 |
-715.62 |
-2.4% |
| Dow Jones |
18,214.42 |
17,985.77 |
228.65 |
1.3% |
| FTSE |
6,949.73 |
6,888.90 |
60.83 |
0.9% |
| Hang Seng |
24,902.06 |
24,832.08 |
69.98 |
0.3% |
| S&P 500 |
2,110.74 |
2,097.45 |
13.29 |
0.6% |
| Yahoo! Jewelry |
1,332.03 |
1,337.37 |
-5.34 |
-0.4% |
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INDIA MARKET REPORT
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Polished Trading Activity
The market is slow overall, even with preparations for the Hong Kong show. Demand from the U.S. remains stable -- mainly in I1 lower goods up to 1-carat. The IIJS signature was a flop for the diamond sector, but quite good for jewelry wholesalers. Read the polished diamond trading report.
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