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Rapaport TradeWire May 25, 2012
May 24, 2012 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
May 25, 2012
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TRADE ALERT: CVD synthetic diamonds, diamonds triple treated to avoid detection and diamonds recut to match higher grade GIA reports being traded without disclosure. Kudos to IGI for detecting and exposing CVDs. We advise buyers to require “Natural Untreated Diamonds” be included on all invoices. Trading slow with low expectations for Vegas shows. Signet 1Q sales +1% to $900M, profits +9% to $83M. Tiffany 1Q sales +8% to $819M, profits +1% to $82M. Zale Corp. 3Q revenue +8% to $445M, net loss of $5M vs. loss of $9M a year earlier. Gitanjali 4Q sales +47% to $643M, net profit +8% to $19M. India’s April polished exports -35% to $1.3B, rough imports +20% to $1.6B.
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| RapNet Data: May 24 |
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| Diamonds |
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907,657 |
| Value |
$6,006,463,015 |
| Carats |
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964,916 |
| Average Discount |
-26.32% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
Just looking at the one Graff customer, which accounted for 13% of sales in 2011, its revenue model is definitely an issue. Lack of brand recognition will also limit investor interest in Graff. Market conditions are very difficult, it’s surprising that they are trying to raise money. In this market, you need something that is cheap and a widely recognized brand.
Philippe Espinasse | 'IPO: A Global Guide'
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants, and entry level positions for our offices in New York, Antwerp, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.
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INDUSTRY
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IGI Finds Hundreds of Undisclosed Synthetic Diamonds
Several hundred man-made diamonds were sent to the International Gemological Institute (IGI) in Antwerp and Mumbai to be certified as natural diamonds, raising concerns that a larger volume of these undisclosed CVD synthetic stones may have entered the market already. An unnamed polished dealer, who had bought the synthetic stones on the open market --at natural diamond prices-- submitted the goods to IGI for certification about two weeks ago after he was unable to sell them as a parcel on the dealer market. The polished dealer and his supplier both claimed to be under the impression that the goods were natural diamonds. IGI issued a trade alert to other laboratories regarding its findings, which can be viewed here.
Subsequently, the Diamond Trading Company (DTC) alerted sightholders that it has identified three recent instances of undisclosed submission of CVD synthetics to grading laboratories in Belgium, India and China, whereby each case had very similar characteristics and may have had a common source. The DTC statement is here.
The Gem & Jewellery Export Promotion Council (GJEPC) also expressed their concern and affirmed a "zero tolerance'' policy on nondisclosure. Read GJEPC's statement here.
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RETAIL & WHOLESALE
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Zale, Gitanjali Sales Rise, HOF Opens its Store
WATCH NOW: Results from Zale's third fiscal-quarter were improved from one year ago, but the chain-store didn't increase sales more than the U.S. consumer price index for jewelry. Gitanjali, on the other hand, reported very robust sales and a surge in profit for its fiscal year. Hearts On Fire (HOF) launched its new concept store in Las Vegas. Ross-Simons launched its video series designed to help shoppers discover their inner style with jewelry accessories. Finally, the Hay Group reported a slight drop in turnover rates for the U.S. retail environment in 2011, led by fewer upper management changes, however, part-time and full-time floor staff rates rose. Hay Group suggests how to retain top talent at a time retailers are working feverishly to ensure profitability.
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Tiffany's Sales +8%, Profit Flat
Tiffany & Co. reported that its first quarter revenue rose 7.6% year on year to $819.2 million for the period that ended on April 30. Same-store sales worldwide rose 4%, while profit was flat at $81.5 million. Sales only improved 3% in the Americas at $386 million, but jumped 16% --at a constant exchange rates-- in the Asia-Pacific region at $195 million and 13% in Japan at $142 million. Sales across Europe rose 7% as measured by local currency to $88 million. The retailer defined U.S. sales as disappointing.
In another development, Tiffany is in the process of negotiating future property rights with designer Elsa Peretti, who owns here intellectual property on jewelry that the company defined as a significant amount of revenue. The two parties are in the process of negotiating those rights, but if an agreement is not reached, Peretti might terminate the licensing agreement, ending a 38 year relationship with the jeweler.
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Signet's Sales +1%, Profit +9%
Signet Group sales for its first quarter rose 1.4% year on year to $900 million in the period that ended on April 28. Signet's U.S. division sales rose 1.8% year on year to $751.5 million, while comparable-store sales rose 1.2%. In the U.K., sales rose 1.4% at a constant exchange-rate and same-store sales increased 1.2%.
Despite weak sales performance, especially given the high rate of jewelry inflation in the U.S. this year, Signet did report a strong increase in profits, up 9.3% to $82.5 million.
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Shree Ganesh's Sales Soar
Shree Ganesh Jewellery House Limited (SGJHL) reported that group sales rose 65% year on year to $376.4 million during its fourth fiscal-quarter that ended on March 31. Net profits more than tripled to $34.7 million during the period from $10.1 million a year earlier. For the fiscal year, the company’s net profit rose 57% year on year to $82.4 million, while net sales increased 73% to $1.8 billion. The company derives more than 85% of its sales from overseas markets such as the United Arab Emirates (UAE,) Singapore and Hong Kong.
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Sears Reports 1Q Profit of $190M
Sears reported that its first quarter sales fell 2.8% year on year to $9.27 billion, however, the retailer improved gross margin to 27.7% from 26.7% for the period that ended on April 28. Furthermore, Sears reported a profit of $194 million, reversing its loss of $170 million one year ago. Net income per share rose to $1.78 compared with a loss of $1.53. The positive income results were indicative of Sears Holdings' strategy to manage the liquidity of their business and improve the company’s inventory management after suffering heavy losses in the past year.
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Ultra-Wealthy Pick Graff as the Best
Ultra-wealthy U.S. shoppers ranked Graff Diamonds highest among 22 luxury jewelers in the 2012 Luxury Brand Status Index (LBSI) survey conducted by the New York-based Luxury Institute. With the top overall LBSI score of 7.98 out of 10, Graff ranked first on brand reputation and product quality considerations, scoring highest in evaluations of materials and craftsmanship. Graff is also the brand that those with assets of more than $5 million are most likely to deem worthy of charging premium prices. Graff was followed by the jeweler Asprey (7.82) and Mikimoto (7.77) as top three jewelers on the survey.
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Rio Tinto Explores Diamond Demand in China
Rio Tinto commissioned global market research company Ipsos to better understand Chinese consumer perceptions about jewelry comprising small, affordable diamonds, referred to as fashion jewelry. The research showed that Chinese consumers no longer see diamonds as purely a store of wealth or bridal purchase. Rather, diamond fashion jewelry is also desirable and part of a broader trend in China towards “affordable luxury.” These insights challenge the conventional wisdom that Chinese consumers only appreciate large, high-quality, white diamonds or gold jewelry. Rio Tinto recently partnered with leading diamond jewelry manufacturer and retailer Chow Tai Fook to promote diamond jewelry as fashion accessories.
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Glendon Group to Acquire Bidz.com
Bidz.com entered into an agreement with Glendon Group Inc., which would take the online retailer private in an all cash acquisition of 78 cents per share. The share price represents a premium of 59.2% over the company's closing price of 49 cents per share on May 16. Bidz.com's board of directors approved the merger with one abstention. Under the agreement, Bidz.com is entitled to actively solicit alternative transaction proposals until June 25. The proposed transaction is expected to close in the fourth quarter of 2012, and is subject to certain closing conditions specified in the merger agreement.
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Aston Luxury Group Acquires Distribution Deal
The Aston Luxury Group (ALG) has become the distributor for six Italian brands across the Americas, including Stefan Hafner, Nouvelle Bague, Valente Milano, Porrati, Io Si and Giantti. The deal was secured by ALG's parent company, Gitanjali Gems.
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USPTO Approves Industry Trademarks
The U.S. Patent & Trademark Office (USPTO) approved three industry-related trademarks on May 15. Merit Diamond Corporation, which owns the ''SIRENA COLLECTION,'' (pictured) was awarded its trademark for that diamond brand, while The Gemological Appraisal Association (GAA) was given the trademark ''The Fingerprint System For Diamonds.” Retailer Fred Meyer Jewelers was also issued the trademark name “the Diamond Bridal Store.”
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GENERAL
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Element Six Opens Manufacturing Facility in CA
Element Six opened its first U.S. manufacturing facility in Silicon Valley, south of San Francisco, California. The facility will house employees in the production, technical and customer service fields, and will serve to establish a direct connection to Element Six technologies division’s customers and partners in the U.S. The company’s continued expansion into the U.S. market is in direct response to the growing demand and interest in synthetic diamond for commercial use in advanced technology applications. The company also recently announced the construction of the world’s largest and most sophisticated synthetic diamond supermaterials research and development facility near Oxford in the U.K.
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Jewelry Makes Top-Loss Category in 2011
Jewelry losses by dollar value in the U.S. this past year surged to the top of the list of property insurance claims, according to a study done by Enservio. Jewelry claims rose from 13% among the top 10 contents-loss categories in 2010 to 17% for Replacement Cost Value (RCV) in 2011, surpassing electronics, which dropped to second place at 13%. the number of jewelry claims increased by 57% in 2011 and theft of jewelry, electronics and tools combined accounted for 62% of all RCV claimed for theft versus 35 percent for all other categories combined. Rings, watches and necklaces all maintained their ranking within the jewelry category as top loss-claim items.
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GJEPC Plans Roadshows to Promote IIJS, IIJW
The GJEPC embarked on an awareness campaign targeting the overseas markets for India International Jewellery Show (IIJS) and India International Jewellery Week (IIJW), which takes place in August. The council has scheduled roadshows between May 23 and June 20, in Malaysia, Singapore, Jeddah, Riyadh, South Korea and China and seeks to invite local jewelers from these countries to view production capabilities and India’s expertise in jewelry manufacturing.
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The Lazare Ongoma to Benefit Five Rand School
Lazare Kaplan International Inc. announced that retailers in its Lazare Diamond Incentive Program in the U.S will get a chance to also support The Lazare Ongoma Initiative (LOI), which works to raise awareness of the educational struggles in Namibia and improve resources available to the Five Rand Primary School in Okahandja. Lazare Kaplan will make a matching donation to The Five Rand Primary School in the name of its retail partners and associates for every registered Lazare Diamond.
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Tiffany Promotes Hart to SVP
Tiffany & Co. appointed Andrew Hart to the newly-created position of senior vice president of diamonds and gemstones. Hart, 44, joined Tiffany as a vice president in 1999 and since 2002, he has been president of Laurelton Diamonds. Hart will continue to report to James N. Fernandez, the executive vice president and chief operating officer of Tiffany & Co.
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Audemars Piguet Appoints Bennahmias
Audemars Piguet appointed Francois-Henry Bennahmias to the interim position of general manager to replace Philippe Merk, who has abruptly vacated the role as chief executive. According to a board statement, Bennahmias, 48, began his career at Audemars Piguet in 1996 and from 1997 he was assistant marketing and sales manager for Asia-Pacific and Europe. In 1999 he was promoted to president and chief executive of Audemars Piguet North America Inc. in New York.
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Bangkok Gems & Jewelry Fair Starts Sept. 13
The 50th edition of the Bangkok Gems & Jewelry Fair (BGJF50) is scheduled for September 13 to 17. Organizers of the five-day fair expect to accommodate more than 3,500 exhibitors at the Impact Challenger Exhibition and Convention Center.
The fair is typically planned twice a year. The 49th edition, which was held in February, hosted 31,376 visitors of which 10,000 or so were from outside Thailand. The jewelry fair also features some 36 country pavilions.
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MINING
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Zimbabwe's Diamond Revenue Far Short of Target
Zimbabwe has received $293 million from rough diamond sales of 11.9 million carats by Mbada Diamonds since August 2010. Mbada Diamonds is 50% owned by the government through the Zimbabwe Mining Development Corporation (ZMDC), and has generated $592 million in sales since it went into operation in August 2010.
Zimbabwe's diamond revenue, however, has underperformed this year. According to the nation's finance minister, Tendai Biti. Biti, the treasury's revenue so far was $287.9 million against a target of $320.2 million, and diamond revenue of $30.4 million was far below the budget plan of $122.5 million. Additionally, Biti condemned diamond mining company Anjin for not remitting revenue or fees from its Marange operation; and he alleged a ''parallel government” was siphoning money away from the treasury through diamond revenue.
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Rockwell Implements Strategic Equipment at Saxendrift
Rockwell Diamonds implemented a new in-field screen and a bulk x-ray and single particle sorter plant at its Saxendrift diamond mine. These two strategic projects were the first capital expenses approved by the company's board for implementation by the new management team. The in-field screen is designed to treat higher instances of sand and moisture, while maintaining the required processing rates. The bulk x-ray technology is aimed at improving concentrate efficiency and final sorting of diamond bearing ore and cost Rockwell $1.5 million. It began processing old recovery tailings at Saxendrift on April 16, and has recovered a total of 316 stones totaling 1,109 carats in the first month of production.
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Rescue Underway for Illegal Miners
Rescue operations continue for a number of trapped diggers at the Namaqualand mines in South Africa after these abandoned tunnels collapsed on the men Tuesday. The diggers were operating illegally. Reports suggest three diggers were killed and as many as 15 still remained trapped. The tunnels were closed in April, however, there has been an increasing amount of illegal digging activity in the region. South Africa's ministry of mines ordered a task force to seal all access points at these mines to curb the illegal diamond digging.
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STATS
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India
| | Apr. $Mil | %Chng. | YTD $Mil | %Chng. | | Polished exports | $1,334 | -35% | $6,668 | -41% | | Polishd imports | $355 | -76% | $2,675 | -72% | | Net exports | $979 | 82% | $3,993 | | | | | | | | | Rough exports | $115 | 21% | $605 | 19% | | Rough imports | $1,581 | 20% | $5,465 | 18% | | Net imports | $1,466 | 20% | $4,860 | | | | | | | | | Net Diamond Account | ($486.70) | | ($867.1) | |
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ECONWATCH
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Diamond Industry Stock Report
U.S. retailers and jewelers rebounded this week, while European shares continued to slide this week, and Indian firms had strong gains. Among the biggest gains for retailers were Movado Group (+19%), Zale (+11%), Blue Nile (+9%), Kohl’s (+7.8%), Macy’s (+7.3%), JCPenney (5.2%), and Saks (5.1%). Mining stocks were down across the board, especially True North Gems (-18.8%), Rockwell Diamonds (-10.4%), Stellar Diamonds (-5.1%), Shore Gold (-3.7%), Namakwa Diamonds (-3.4%), and Mountain Province (-2.4%). Only exceptions were Stornoway Diamonds (+2.5%), Gemfields (+2.4%), and Peregrine Diamonds (+1.7%).
Read the extended industry stock report for this past week.
| | May 24 | May 17 | Chng. | | | $1 = Euro | 0.798 | 0.790 | 0.007 | | | $1 = Rupee | 55.65 | 54.38 | 1.3 | | | $1 = Israel Shekel | 3.85 | 3.83 | 0.02 | | | $1 = Rand | 8.35 | 8.33 | 0.02 | | | $1 = Canadian Dollar | 1.02 | 1.02 | 0.00 | | | | | | | | | Precious Metals | | | | | | Gold | $1,559.60 | $1,573.70 | -$14.10 | | | Platinum | $1,419.00 | $1,449.00 | -$30.00 | | | | | | | | | Stock Indexes | | | | Chng. | | BSE | 16,222.30 | 16,070.48 | 151.82 | 0.9% | | Dow Jones | 12,529.75 | 12,442.49 | 87.26 | 0.7% | | FTSE | 5,350.05 | 5,338.38 | 11.67 | 0.2% | | Hang Seng | 18,666.40 | 19,200.93 | -534.53 | -2.8% | | S&P 500 | 1,320.68 | 1,304.86 | 15.82 | 1.2% | | Yahoo! Jewelry | 913.67 | 933.88 | -20.21 | -2.2% |
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INDIA MARKET REPORT
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Polished and rough trading activity
Polished trading is restrained and the dollar reached new highs against the rupee, furthermore liquidity is very tight and there is ample supplies of rough in the market.
Read the full report.
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