Retailscope

RAPAPORT... The last stop for diamonds is the retail store. Here is a behind-the-scenes look at what is happening at retail in the U.S.

JA Explains How Stimulus Act Will Benefit Jewelers

Jewelers of America (JA) released a statement welcoming the passage of the American Recovery and Reinvestment Act of 2009 and listing the provisions that could have the biggest impact on jewelers, namely:

• Small businesses with annual revenues under $15 million can use losses from 2008 to offset profits from earlier years;
• The Small Business Administration (SBA) will eliminate or reduce fees for participation in its loan guarantee program, which insures banks against default by small business borrowers;
• The SBA will be allowed to loan money to small businesses to pay off existing loans, while interest on stabilization loans will be fully subsidized and these loans won’t require any payments for the first year; and
• Businesses restructuring their debt could delay paying taxes on the transaction for five years and then spread the payments over an additional five-year period.

Overall, about a third of the stimulus funds, totaling $286 billion, will be spent on tax cuts designed to jump-start consumer spending, according to JA’s statement. One such tax cut is a refundable, first-time homebuyer credit that could impact young couples spending money in the bridal market. For more information on the SBA provisions, visit www.sba.gov.

JA Urges Congress to Pass Sales Tax Fairness Act

Matthew A. Runci, Jewelers of America (JA) president and chief executive officer (CEO), wrote a letter to Senator Michael B. Enzi (R-Wyoming) and Representative William Delahunt (D-Massachusetts), who sponsored sales tax fairness bills during the previous session of Congress, urging them to reintroduce and pass the Sales Tax Fairness and Simplification Act. The law would permit states to require that remote sellers, such as companies selling over the internet and telephone or through mail-order catalogues, collect sales taxes. A statement from the trade group explained that internet and other remote sellers have had an advantage over brick-and-mortar stores because the Supreme Court barred states from requiring that remote sellers collect sales taxes in 1992. At the time, the court ruled that remote retailers would find it too difficult to collect taxes for so many different jurisdictions, according to JA.

However, the Streamlined Sales and Use Tax Agreement (SSUTA) has simplified tax rules and applied new technology to tax collection procedures, according to the statement. The trade group cited a University of Tennessee study estimating that the revenue state and local governments could have accrued from such a tax amounted to over $30 billion annually. The National Retail Federation (NRF) has also supported the issue and offers more information on its website, www.salestaxfairness.com/index.htm.

Finlay Quits Department Stores, Restructures

In a much-anticipated move, Finlay Enterprises announced in a statement that the company will abandon its business in leased department store counters at Bloomingdale’s, Macy’s, Bon-Ton, Boston Stores, Herberger’s, Lord & Taylor, Dillard’s and Parisian. Finlay also plans on closing approximately 40 of its less profitable specialty jewelry stores, which include Bailey Banks & Biddle, Carlyle & Co., J.E. Caldwell, Park Promenade and Congress Jewelers.At the end of March, the NASDAQ notified Finlay, whose stock was suspended from the exchange on July 11, 2008 for falling below the minimum required value, that its common shares would be delisted. Finlay did not appeal this move, but did relist as “FNLY.OB” on the Over-The-Counter Bulletin Board (OTCBB).

The firm provided cost estimates for its restructuring plans, explaining in a statement that it expects to record a pretax charge of between $85 million and $95 million in the fiscal fourth quarter, which ended on January 31, 2009. Finlay will reduce headcount primarily in administrative positions based in New York and in sales associate positions at stores slated for closure.

The company reached an agreement on the credit terms with its lenders, reducing available commitments to $300 million comprised of $262.5 million in Tranche A revolving commitments and an additional $37.5 million in Tranche B revolving commitments. It amended the termination date of its credit agreement to February 25, 2010, which requires Finlay to comply with certain requirements, including additional financial reporting to lenders.

Gold Month Goes Digital

The national “May is Gold Month” (MIGM) retail promotion will continue in its sixth year with a stronger online presence. A statement from its sponsors — the World Gold Council (WGC), Jewelery.com and the Richline Group — pegged the campaign at $2.5 million.

MIGM will be celebrated on the redesigned Jewelry.com, which will also hold a sweepstakes. Jewelry.com will drive traffic to the websites of all its partner retailers: Fred Meyer Jewelers, Gordon’s Jewelers, JCPenney, Kay Jewelers, Zales, Littman Jewelers, Macy’s and Sears. Web banner advertising is scheduled for the iVillage, CNN and Oprah.com websites and viral promotion will be driven by Jewelry.com’s Facebook group and targeted Facebook applications.

Print publications, such as Allure, Lucky, InStyle, Redbook and Vanity Fair, along with websites for A&E, Food Network, CNN and other networks, will feature advertisements that encourage consumers to visit the retailers’ websites. Independent brick-and-mortar jewelry retailers may download the MIGM logo and point-of-sale materials from the WGC’s website, www.marketing.gold.org.

Additionally, MIGM will inaugurate its presence on the virtual-community website Second Life. Second Life players can win a virtual personalized gold locket and invite their friends to create one as part of a promotion featured at virtual Kay Jewelers stores and gold-themed events in high-traffic Second Life areas online.

Changing the Rules of Engagement

Men in some countries have worn engagement bands for years and this trend is now starting to catch on in the U.S. and U.K. “Women are buying men rings to take them off the market,” explained Heather Levine of online wedding authority The Knot. More women want to mark their boyfriends as “taken” during the engagement period and men want an equal piece of the prenuptial lovefest, according to a report from Columbia News Service.

The jewelry industry is starting to catch on, as well. In January, the British jeweler H. Samuel released five male engagement rings, all in titanium set with small diamonds and ranging in price from about $113 (GBP 79.99) to $141 (GBP 99.99). Natasha Gregory, buying controller for the company, stated that U.K. women are no longer waiting for men to pop the question, adding that the rings are a clear message to everyone that a man is to be married. — Additional reporting by Dialog NewsEdge.

EcoFriendly Jared Store Planned

A new Jared the Galleria of Jewelry store will feature “green building methods,” according to a statement released by the Planning and Transportation Commission of Mission Viejo, California. The city, located about halfway between Los Angeles and San Diego, approved the construction of a new 5,937-square-foot building. Jared, which is owned by Signet Jewelers, currently has eight stores in California.

Cascade Star Enters Online Market

Cascade Star, founded in 2005, kicked off its online diamond jewelry boutique. The etailer targets consumers seeking haute couture diamond jewelry designs, loose diamonds, diamond solitaire rings, earrings and pendants. The website also offers custom jewelry designs and assistance from jewelry consultants. Cascade Star’s jewelry comes with a 30-day return policy and a lifetime warranty on material quality and craftsmanship. The company is backed by several strategic partnerships with jewelry manufacturers, including three Diamond Trading Company (DTC) sightholders and one Rio Tinto Select diamantaire.
 
First Tiffany Store in Amsterdam Planned

Tiffany & Co. will open a new store in Amsterdam in the fourth quarter of 2009 in a historic building in the city’s shopping district. The boutique, which is approximately 2,100 square feet, will feature the signature details found at Tiffany’s New York City flagship, including custom furnishings.

Article from the Rapaport Magazine - April 2009. To subscribe click here.