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Rapaport Weekly Market Comment
May 24, 2013
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Diamond markets stable ahead of Las Vegas shows. Manufacturers pressured by high rough prices and low volume trading. Cutting center liquidity tight as Indian factories close for summer vacation. Sentiment improves as U.S. retailers experience steady 1Q: Signet Jewelers sales +10% to $994M, profit +11% to $92M; Zale Corp. shares rally as revenue -1% to $443M but profit of $5M vs. loss of $4.5M a year earlier and Terry Burman appointed chairman. Richemont FY sales +9% to $13B, jewelry sales +13% to $6.7B. Winsome Diamonds and Jewellery 4Q revenue +9% to $350M, loss of $15M vs. profit of $2M. Antwerp Diamond Bank 2012 profit +152% to $11M by adopting conservative, selective credit policy.
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| RapNet Data: May 23 |
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| Diamonds |
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1,002,572 |
| Value |
$6,415,855,357 |
| Carats |
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1,094,885 |
| Average Discount |
-27.35% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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RAPAPORT ANNOUNCEMENTS
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May-Jun
27-3
Mon-Mon
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Rapaport Jewelry AuctionCloseout and estate jewelry Las Vegas View details.
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May-Jun
30-6
Thu-Thu
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Rapaport Melee Auction
Las Vegas & New York
View details.
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May-Jun
31-3
Fri-Mon
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RapNet Diamond Listing Service
Register HERE for RapNet's
Diamond Listing Service
at JCK Vegas 2013!
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June
2
Sun
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Rapaport Breakfast & Conference at JCK
Mandalay Bay Resort 8 a.m. to 10 a.m. -- South Seas Ballroom, breakfast and Martin Rapaport's ''State of the Diamond Industry'' presentation. 10:30 a.m. to 12:30 p.m. -- Banyan Ballroom, Rapaport Certification Conference with RapNet insights into grading reports. 2 p.m to 4:30 p.m. -- Banyan Ballroom, Rapaport Fair Trade Jewelry Conference. Register now, or email conference@diamonds.net or call 1.702.893.9400, these events are free but seating is limited.
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QUOTE OF THE WEEK
We have been growing at a very fast pace. [Our] new factory will help us meet the ever rising consumer demand across the globe and will augment our manufacturing in India, Botswana and South Africa. This unit will also cater to the requirements of our export oriented jewelry manufacturing units.
Vishal Doshi | Shrenuj & Company
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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. View jobs now.
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RETAIL & WHOLESALE
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Signet's Profit +11%
Signet Jewelers reported that sales rose 10.4% year on year to $993.6 million for the first quarter that ended on May 4. Same-store sale increased 6.4% and ecommerce revenue jumped 40.7% to $31.1 million. Profit improved 11.3% to $91.8 million; however, earnings per share (EPS) jumped 17.7% to $1.13 as the weighted average diluted number of common shares fell to 81.3 million compared with 86.3 million one year ago. Gross margin as a percentage of sales fell to 38.5% from 39.3%.
U.S. division sales rose 14.3% to $858.6 million, while comparable-store sales increased 8.1% and performance was driven by broad based strength across all merchandise categories at the Kay and Jared brand stores. U.K. division sales fell 5.5% at constant exchange-rates and same-store sales declined 2.3%. Revenue in dollars decreased 9.1% to $135 million in part due to negative currency fluctuations and the impact from store closures of H.Samuel.
Signet's inventory level rose 6.8% to $1.4 billion and this was primarily due to the Ultra acquisition, rough diamond purchases, expansion of bridal programs and new store growth. During the quarter, Signet closed 17 stores and opened 15.
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Zale Reports a Profit
The Zale Corporation reported that revenue slipped 0.6% year on year to $442.7 million for the third quarter that ended on April 30. However, Zale reduced its cost of sales 3.3% to $210 million and improved gross margin as a percentage of sales to 52.6% from 51.3%. Zale recorded a profit of $5.1 million, or 16 cents per share, compared with a loss of $4.5 million, or 14 cents per share, in the third quarter of fiscal 2012.
Comparable-store sales rose 1.4% with branded stores, consisting of Zales Jewelers and Zales Outlet, posting a same-store sales increase of 3%. Canada-based jewelry brands posted a comparable-store sales increase of 1% at constant exchange rates. Inventory levels rose to $828 million compared with $779 million on April 30, 2012.
Signet Group's former CEO, Terry Burman, was appointed as a director and the chairman of the board of Zale. John B. Lowe, Jr., who has served as Zale's chairman for the past five years, will remain on the board.
Burman said, “I am delighted to assume the role of chairman of the board at Zale at such an important point in their turnaround program. I am looking forward to working with Zale’s management and board to refine the company’s strategy and priorities to drive profitable growth and create shareholder value.”
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Richemont's Profit +30%
Richemont reported sales rose 9% year on year to $13 billion for the fiscal year that ended on March 31. The luxury group confirmed growth across all of its segments and geographies. Retail sales jumped 11%, while wholesale revenue increased 7%. Profit surged 30% to $2.6 billion, which was in line with expectations and largely a result of favorable exchange rates. Jewelry sales rose 13% year on year to $6.7 billion, with strong sales at Cartier and Van Cleef & Arpels, according to the company. Specialist watchmaker sales rose 18% to $985.8 million.
No issue with Europe's luxury economy as sales jumped 14%, but in the Asia Pacific region sales rose only 5%. Revenue across the Americas increased 11%, while sales in Japan improved 6%.
Richemont's chairman, Johann Rupert, announced that he will be taking a one year sabbatical. Richemont’s senior executive committee, including Bernard Fornas, Richard Lepeu and Gary Saage, will manage the company in Rupert's absence. Yves-André Istel, Richemont's deputy chairman, will chair the board meetings. Richemont's CEO of fashion and accessories, Martha Wikstrom, resigned from her post, but will continue to serve as a non-executive director of the board until the company's shareholder meeting on September 12.
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Saks' Profit -38%
Saks Inc. reported that sales rose 5.2% year on year to $793.2 million for the first quarter that ended on May 4. Same-store sales increased 5.9% but by accounting for the previous 53-week fiscal year that in turn distorted figures for the current year, comparable-stores sales would have increased 4.2%. The retailer's profit plunged 37.8% to $20 million. Jewelry was not listed as a strong merchandise category during the period. Saks' inventory increase 7.9% to $856.4 million.
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PC Jeweller's Profit +26%
PC Jeweller reported that its profit jumped 26% year on year to $52 million for fiscal year 2013 that ended on March 31. Revenue surged 32% to $725 million. PC Jeweller operates 36 showrooms in 28 cities across India and five jewelry manufacturing facilities.
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Winsome Reports a Loss
Winsome Diamonds and Jewellery Limited reported revenue from operations rose 8.5% year on year to $350 million for the fourth fiscal quarter that ended on March 31. However, the company recorded a loss of $15.3 million, down from a profit of $2.2 million one year ago. Exports of cut and polished diamonds represented less than 10 percent of turnover. Fiscal year revenue rose 28.6% to $1.3 billion but the company recorded a loss of $6.1 million compared with a profit of $17.5 million. The board of directors filed a request with regulators to extend its financial year by six months to September 30.
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ADB's Profit Surges
The Antwerp Diamond Bank (ADB), a subsidiary of KBC Bank, stated that higher margins, especially in the Indian marketplace, helped to boost interest income 10% in 2012, while operating profit jumped 11% and net profit surged 152%. ADB confirmed a tier 1 capital ratio of 10.05%, noting that it ''amply meets'' international norms, notwithstanding a stricter calculation method.
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Macy's Closes at Railway Exchange
Macy's Inc. will close its downtown St. Louis, Missouri store at the Railway Exchange Building on Olive Street and hold a final clearance sale beginning on June 2 for approximately 10 weeks. This store opened in 1924 and Macy's stated that it employs 94 associates, all of whom will be affected by closure and may be offered positions in nearby stores and facilities. Additionally, about 100 Macy's associates who work in various corporate and district offices on the ninth and 10th floors of the Railway Exchange Building will be relocated to space in existing Macy's office facilities in Earth City in St. Louis County. The planning for that move will begin as the store is closed.
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Shrenuj & Co. Opens New Factory
Shrenuj & Company Ltd. commissioned a new diamond cutting and polishing factory in Patna. The new facility is expected to create job opportunities for about 1,500 people when it becomes fully operational. At the present time, it employs about 150. The company expects to produce nearly 300,000 diamond pieces per month once it reaches full production capacity.
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Coalition Challenges RJC's Certification Scheme
An international coalition of labor unions and environmental groups, including IndustriALL, CFMEU Australia, United Steelworkers, Earthworks and MiningWatch Canada, released a report titled ''More Shine Than Substance: How RJC Certification Fails to Create Responsible Jewelry,'' criticizing the Responsible Jewellery Council’s (RJC) certification system as inadequate and misleading to consumers. The report claimed to document how RJC's system is riddled with loopholes related to membership, auditing and accountability and enables company compliance, while excluding questionable diamond or precious metal producing facilities. Furthermore, the group found it troubling that auditing reports are not made public.
Read the report.
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Meads Joins Blue Nile's Board
Blue Nile Inc. appointed Mindy Meads to its board of directors. Meads was described as a seasoned C-suite level executive with 35 years of experience in the global apparel industry. Meads also serves on the boards of Wet Seal and Mela Sciences. In those roles, she provides strategic counsel focused on growth and the use of multi-channel business strategies. Previously, Meads was co-CEO of Aeropostale, where she reinvigorated the merchandise assortment and launched "P.S.," Aeropostale's kid's division.
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MINING
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Lucara's Special Tender Nets $25M
Lucara Diamond Corporation held a special tender of Karowe diamonds on May 22, which consisted of 15 single lots of diamonds. All 15 stones were sold for $24.85 million or $30,468 per carat. The highest value stone was a 239-carat diamond that sold for $5.75 million, with an additional four diamonds selling for more than $2.5 million each. The junior miner stated that in the past few weeks there have been additional large diamonds recovered.
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Rio Launches Diavik Auction Platform
Rio Tinto Diamonds launched a sales platform to auction a portion of its Diavik diamond production outside of its usual supply agreements with diamantaires. The new auction platform complements existing business model of placing a majority of production through supply agreements, with a more limited proportion of production made available for sale to a wider selection of customers.
Additionally, Rio Tinto will be showcasing three fancy red diamonds at its annual Argyle pink diamonds tender. Since mining began in 1983 at Argyle, only six diamonds certified as fancy red have been presented for sale. Rio will offer a 1.56-carat round gem called Argyle Phoenix™ named for newly commissioned Argyle underground mine, a 3.02-carat radiant, fancy intense orangey pink diamond, named Argyle Imperial and a 0.71-carat blue heart-shaped diamond named Argyle Celestial. The tender offers 64 diamonds in all, including 58 pink diamonds, three fancy red diamonds and three blue diamonds.
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ALROSA to Sell $100M to Gokhran
ALROSA expects to sell $100 million worth of rough to the Gokhran this year as per its budget plan. The company's CEO, Fyodor Andreyev, told reporters there is a concern the market trends will repeat last year when first half demand growth stalled in the second half.
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Firestone Finances Treatment Plant
Firestone Diamonds signed a financing agreement with an international bank for its main treatment plant at the Liqhobong mine. The bank appointed independent advisers and has commenced its due diligence process on the miner, which is expected to be completed within six months. A definitive feasibility study in October 2012 indicated that the company required an initial capital expenditure of $167 million for infrastructure.
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Positive Assessment for Wouterspan
Rockwell Diamonds Inc. updated its preliminary economic assessment on its Wouterspan alluvial diamond property, which is located on the opposite side of the Orange River from its Saxendrift diamond mine in South Africa. The assessment resulted in positive enough economics to take the project through a detailed design stage. The economic model yielded an internal rate of return of between 45% and 70%. The net present value for the base case was $91.71 million at a 15% discount rate, yielding a project payback period of 2.3 years from the start of construction or approximately 1.3 years from commencement of diamond production, according to Rockwell.
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Zambia to Host Intl. Emerald Summit
Gemfields is sponsoring an emerald summit in Zambia on May 30 and 31 to discuss a wide range of issues such as transfer pricing, recording revenue and profit in Zambia, facts and figures on the local emerald sector, updates from key emerald producers, issues affecting small-scale miners, insights on informal and illegal emerald markets in Zambia and much more.
Corporate social responsibility in the Zambian emerald sector will also be discussed, along with marketing Zambia’s emeralds through exchanges, auctions, direct-selling and consumer advertising, and lessons from the diamond sector.
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ECONWATCH
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Diamond Industry Stock Report
U.S. retail shares were mainly higher with Blue Nile (+7%), JPC (+7%), Saks (32%) and Zale (25%) performing best. European and Indian shares were lower as Theo Fennell (-12%) and Winsome (-18%) led the downers. Mining shares were weaker except for Lucara (+9%). View the extended stock report.
| | May 23 | May 17 | Chng. | | | $1 = Euro | 0.770 | 0.780 | -0.010 | | | $1 = Rupee | 55.72 | 54.89 | 0.8 | | | $1 = Israel Shekel | 3.70 | 3.67 | 0.03 | | | $1 = Rand | 9.53 | 9.39 | 0.14 | | | $1 = Canadian Dollar | 1.04 | 1.03 | 0.01 | | | | | | | | | Precious Metals | | | | | | Gold | $1,391.20 | $1,360.20 | $31.00 | | | Platinum | $1,460.00 | $1,451.00 | $9.00 | | | | | | | | | Stock Indexes | | | | Chng. | | BSE | 19,674.33 | 20,286.12 | -611.79 | -3.0% | | Dow Jones | 15,294.50 | 15,289.24 | 5.26 | 0.0% | | FTSE | 6,696.79 | 6,725.38 | -28.59 | -0.4% | | Hang Seng | 22,669.68 | 23,082.68 | -413.00 | -1.8% | | S&P 500 | 1,650.51 | 1,658.15 | -7.64 | -0.5% | | Yahoo! Jewelry | 1,008.03 | 1,022.61 | -14.58 | -1.4% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Summer holidays are limiting activity. Markets are surprised by De Beers increase (4 to 5 percent) in rough. Shortages of goods exist, especially for SI and lower categories.
Read the full report.
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