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Consumer Sentiment Improves
The Reuters/University of Michigan consumer sentiment index grew by 6.3 points in January 2007 to finish at 98 points. The month-on-month survey is considered by some economists to be a measure of what consumers feel about the state of the economy in the United States. Consumers told pollsters that they expect inflation to remain at about 3 percent, or 0.1 percent higher than the inflation rate expectations reported in December 2006.
Chain Stores Experience Year End Flurry
Consumers waited until late in the holiday season to finish their shopping, but chain stores in the United States still registered an overall 3.1 percent hike in sales for December 2006 compared with December 2005, according to the International Council of Shopping Centers (ICSC) index. That growth level was comfortably higher than ICSC’s forecast of 2.5 percent. In addition, for the combined two-month holiday shopping season of November and December, chain store sales delivered a 2.8 percent gain, which was in line with ICSC’s projection of 2.5 percent to 3 percent. The 2005 holiday season produced 3.6 percent growth.
Leading sectors for December were luxury chain stores and wholesale clubs, which registered sales increases of 8.2 percent and 6.2 percent, respectively. Department chain stores continued to post healthy results as sales rose 3.6 percent in December. As a result of December’s weather being the warmest in five years, apparel chain stores suffered a sales decline of 0.9 percent. “More so than in past seasons, this holiday season came down to the week before Christmas as consumers waited to the last minute to complete their shopping,” noted Michael Niemira, ICSC’s chief economist and director of research. “Overall, this holiday season was a moderate one for retailers.”
BJ’s CEO Disappointed In Jewelry
During a January conference call with analysts, BJ’s Wholesale Club Chairman and interim Chief Executive Officer Herb Zarkin revealed that one of the retailer’s biggest disappointments in 2006 was the performance of the group’s jewelry department. “I will state clearly — we are very disappointed in the jewelry performance this year,” Zarkin said.
BJ’s had heavily invested in jewelry and did so with better quality merchandise and at “much higher price tickets,” Zarkin added. “I think we are too high-priced on the watches,” he conceded. “We had a wonderful selection of watches. The price of jewelry skyrocketed. Also, gold was expensive; diamonds, stuff like that. We had higher price points there too.”
Since BJ’s is not a service-oriented shopping experience, Zarkin indicated that the retailer did intentionally staff up specifically for jewelry. “I don’t think we staffed it as well as we should,” he acknowledged. “We didn’t train the people. So, I think the lesson here is if we are going to staff something, we have to train people. We can’t just put a body in there and expect them to help make sales.”
Harry Winston Tops Index
In the Luxury Institute’s (LI’s) latest luxury brand status index (LBSI) of luxury jewelry, high-net-worth consumers nominated Harry Winston as the leading brand by a wide margin. Buccellati was ranked second, slightly above third-placed Cartier, among the 20 luxury jewelry brands included. Those brands LBSI study respondents were asked to rate were: Asprey, Blue Nile, Boucheron, Buccellati, Bulgari, Carrera y Carrera, Cartier, Chanel, Chopard, David Yurman, De Beers, Dior, Fred, Graff, Gucci, Harry Winston, Mikimoto, Piaget, Tiffany, and Van Cleef & Arpels.
Milton Pedraza, LI’s chief executive officer (CEO), said that the LI developed the LBSI at the request of luxury brand CEOs as a method of generating objective, independent tracking metrics that they could use to efficiently gauge where their companies and competitors stood with ultra-wealthy consumers. The LI considers high-net-worth consumers to be those who have a minimum household income of $200,000 and a net worth of $5 million.
Signet Seeks “Sizable” U.S. AcquisitionSignet Group’s Chief Executive Officer Terry Burman has told reporters that the firm plans to make a “sizable acquisition” and is in talks with a rival in the United States. In mid-2006 Signet and Zale Corporation had discussions about a possible merger, but those negotiations ended without a deal being struck. “The chains we would like to buy have been notified of our interest,” Burman revealed. “They have acknowledged our interest and have said they wouldn’t hesitate to call us when they are ready to sell the stores.”
Investment house Goldman Sachs (GS) indicated in a recent analyst’s report that the United Kingdom-based Signet may be looking to acquire Zale Corporation’s Gordon’s Jewelers or Bailey Banks & Biddle retail jewelry chains.
Signet has more than 1,300 stores in the U.S., trading under different brand names including Kay Jewelers, Jared The Galleria Of Jewelry and a number of regional names. The jewelry group has stated that it is looking to create a new national brand. The GS report suggested that selling Zale’s smaller divisions made sense because it “enables management to focus its attention more intently on turning around Zale with fewer distractions, and, in the event that a turnaround stalls, a whittled-down Zale could potentially become a more digestible takeover candidate.”
Meantime, Signet announced that its same-store sales for the nine weeks ended December 30, 2006, advanced 5.9 percent, with the U.S. business division up 7.5 percent and the United Kingdom up 1.7 percent. Total group sales grew by 10.2 percent at constant exchange rates and by 1.4 percent on a reported basis.
Weaker Holiday Season For Finlay
While Finlay Enterprises’ same-store sales for the November and December 2006 holiday shopping season edged up 1.6 percent, its total sales for the two months fell 21.3 percent to $303.2 million. “Our holiday sales were lower than anticipated primarily due to the disappointing performance of our 236 former May Company doors, which was a result of a decrease in promotional activity versus the prior year,” commented Arthur Reiner, Finlay’s chief executive officer. Its overall sales for the 11 months ended December 30 declined 7.8 percent to $879.5 million. Comparisons are with the corresponding periods of 2005.
Federated’s Softer DecemberThe nation’s second largest retailer, Federated Department Stores, reported a 4.4 percent increase in same-store sales for the five weeks ended December 30, 2006, versus the same period in 2005. Total sales were 8.5 percent lower at $4.99 billion. For November and December combined, Federated’s same-store sales increased 5.7 percent. At press time, fiscal year-to-date same-store sales were 4.1 percent ahead of where they were by the end of the corresponding 48 weeks in 2005. “While December sales were somewhat softer than expected, we overcame unseasonably warm weather in most of the country and ended the month strong,” said Terry Lundgren, Federated’s chief executive officer.
Rich Quarter For Swiss GroupRichemont posted 10 percent growth in overall sales for its third quarter ended December 31, 2006. At a constant exchange rate, sales rose by 15 percent. The company’s jewelry stores recorded an 8 percent rise in sales, while its specialist watchmakers delivered growth of 13 percent at actual exchange rates. Group sales increased during the third quarter despite more challenging comparative figures and the further weakening of both the dollar and yen against the euro, Richemont noted. Jewellery Maisons, comprising Cartier and Van Cleef & Arpels, reported double-digit growth in underlying sales for the quarter, with strong performances in the Asia-Pacific region as well as in the United States.
Group sales for the nine months ended December 31, 2006, swelled 13 percent to $5 billion at actual exchange rates. Comparisons are with the corresponding periods of 2005.
Jewelry Stock Index Company
Company 01/24/07 12/27/06 % Change
Blue Nile 39.00 36.37 7%
Finlay Enterprises 8.82 8.33 6%
House of Taylor Jewelry 2.60 2.48 5%
Lazare Kaplan Intl. 9.85 9.05 9%
Signet Group 23.65 23.58 0%
Tiffany & Company 39.80 39.88 0%
Zale 28.00 27.99 0%
Article from the Rapaport Magazine - February 2007. To subscribe click here.