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Industry
Jewelry Holiday Sales Sparkled
A thriving stock market and improving economy provided jewelers with a happy holiday.
By Brian Bossetta
It was a foggy holiday season that was plagued with six fewer shopping days, bad weather that kept consumers at home on critical weekends and aggressive price discounting by retailers that eroded their profits. Still, jewelry shone through in the all-important close to 2013.
Unlike the 2012 holiday season, when the jewelry sector underperformed other luxury goods, jewelry sales in 2013 outpaced most other product categories despite what Theo Killion, chief executive officer (CEO) of Zale Corporation, referred to as a “challenging retail environment.”
“The jewelry sector fared well, despite choppy traffic and shopping trends,” said David Wu, luxury analyst for Telsey Advisory Group, a New York City–based research and brokerage firm. Wu attributed the robust jewelry sales to “strong demand” in engagement and fashion jewelry, as well as an overall improvement in the economy and stock market. “A healthy stock market is the ultimate feel-good factor,” Wu said, noting that, against the backdrop of a robust stock market, “People felt more comfortable purchasing high-end goods and high-end retailers continued to do well.”
Engagement ring purchases were a catalyst for holiday jewelry sales and the bridal business excelled, according to Wu, because, not only are the holidays a traditional time for marriage proposals, but “with an improving macro economy, men felt more confident in proposing.”
A heightened level of product innovation among jewelry companies, such as Zale’s Vera Wang Love and Signet’s Open Hearts, also contributed to the success of jewelry, Wu added.
For the eight-week period that ended on December 28, sales for Signet, the largest jewelry retailer in the U.S. and U.K., grew 7.7 percent year over year to $1.276 billion. For that same period, sales at Signet’s two largest U.S. chains, Kay and Jared, were even more impressive. Kay posted 8.9 percent growth to $674.8 million and Jared rose by 11.6 percent to $312.5 million.
Same-store sales for Kay and Jared grew more modestly, both at 5.6 percent. “The U.S. holiday season was highlighted by a strong November and a strong finish to December,” said Signet CEO Mike Barnes. He cited the company’s performance overseas, saying he was “especially encouraged” with his U.K. division, whose sales during the 2012 holiday period rose by less than 1 percent. In 2013, the U.K. stores, Ernest Jones and H. Samuel, posted 8 percent and 3.3 percent growth, respectively. Barnes also highlighted ecommerce sales, which spiked 27.2 percent.
The country’s largest luxury retailer, Tiffany & Co., posted a 4 percent increase to $1.03 billion for the months of November and December, with comparable-store sales rising 6 percent. Total revenue throughout the Americas region increased 6 percent to $550 million, with comparable-store sales climbing by 7 percent. “Tiffany enjoyed a good holiday season with overall sales results in line with our expectations, and we were pleased to see growth across our fine and statement, engagement and fashion jewelry categories,” said Tiffany & Co. CEO Michael J. Kowalski.
Though Zale reported a 2 percent increase in same-store holiday sales, the company reported a 1.9 percent drop in overall revenue year on year to $556 million for November and December. The company blamed that decline on 91 store closings in 2013, along with a weakened Canadian dollar.
Same-store sales for Zale’s branded stores — Zales Jewelers and Zales Outlets — which account for the bulk of the Zale Corporation total sales, rose 4.4 percent. “Our holiday performance gives us confidence we can achieve our financial expectations for the fiscal year,” said Killion.
Aside from jewelry, Wu described the overall 2013 holiday season as weaker than expected. In Wu’s estimation, the truncated season, feverish discounting and inclement weekend weather might have dulled consumer enthusiasm to get out and shop. “Generally speaking, it was just disappointing,” Wu said.
“Retail sales have been volatile all year and the holiday shopping season was no exception,” said Jack Kleinhenz, chief economist for the National Retail Federation (NRF). “Undoubtedly, some of the increase came at the expense of margin. Retailers are still stressed and a long-term promotional environment may actually hurt the bottom line.”
According to NRF numbers, 2013 total holiday retail sales rose by 3.8 percent from 2012 to $601.8 billion, falling one-tenth of a percentage point short of the retail association’s initial 2013 holiday forecast of 3.9 percent. Though not robust, those results were an improvement from 2012, which by most accounts was a dismal year for retailers.
NRF CEO Matthew Shay had a positive take on the 2013 tallies. “Considering that retail sales are an important barometer when measuring the overall health of our national economy, this report provides a level of true optimism that the recovery is picking up steam, and once again, retail leads the way.”
Overall, fewer consumers went shopping. According to ShopperTrak, a firm that gauges retail foot traffic, there was a 14.6 percent decline in consumers shopping in stores in 2013 from the 2012 holiday season. Compounding the problem of less traffic was the fact that those shoppers who did venture out to the stores spent less.
That lowered expenditure could be due to cautious consumers more hesitant to part with their dollars or to retailers offering their goods at substantial discounts. The fact remains that many retailers saw lower profits despite gains in sales volume, a discrepancy that reflects the widespread discounting that they engaged in from the first days of the shopping season in an effort to jump-start shoppers in a still-shaky economy. That was much earlier than in past years, when bargain prices usually were promoted in the closing days of the season to clear shelves of slow-moving merchandise.
Even during those periods when the traffic picked up, more shoppers did not equate to higher sales. According to the NRF, sales for Black Friday, which kicked off the holiday season, declined from 2012 although more shoppers were in the stores. Yet, these tricky patterns of fewer shoppers shopping or shopping more but spending less, while negatively impacting the bottom line for the retail industry overall, might have benefited jewelers.
Typically, a jewelry purchase, especially as a gift, is not a compulsive one. “Jewelry is a tough gift-giving item,” Wu said. “It’s an emotional purchase, especially in terms of engagement rings.”
IBISWorld, when it released its 2013 holiday forecast in November, based its prediction for success in the jewelry sector on “Americans returning to the heart of the holidays and spending time and money on family, friends and loved ones that matter most.”
Compared to the 2012 holiday season, when retailers were hit with unforeseen challenges such as Hurricane Sandy and the school shooting in Newtown — events that altered the focus of consumers — as well as fiscal cliff brinkmanship in Congress that stifled consumer confidence, the 2013 holiday season, while weaker than expected, was certainly an improvement from the previous year.
Now, looking ahead, with a stabilizing economy — albeit slowly — and a budget deal in Washington, there is reason for optimism, especially for jewelers. “If the stock market remains healthy and if housing and employment figures continue to trend well, then I see a continued demand for the jewelry market,” Wu said.Article from the Rapaport Magazine - February 2014. To subscribe click here.
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