Rapaport Magazine

Retail Scope

July 2007

By Rapaport
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.

U.S. Retail Sales Rebound in May

Retail sales in the United States rebounded in May from a weak April, the National Retail Federation (NRF) reported.

Sales across the entire retail industry rose 4.7 percent in May 2007, the group reported, after retail sales fell in April, according to government figures.

Sales in most retail sectors grew, as clothing and clothing accessories stores beat expectations with sales 9.1 percent higher than the May 2006 level. Against April 2007, clothing sales grew 2.7 percent in May. Health and personal care stores sales rose 0.8 percent from April, and by 6.5 percent over May 2006.

Slower sectors were generally housing-related industries, reflecting the effect of the weak property market, NRF explained. Of these, building material sales declined 0.3 percent from May 2006, but grew 2.1 percent from April 2007. Furniture and home furnishing stores sales rose a subdued 0.3 percent from April, and 2.9 percent over May 2006.

Fashion jewelry sales proved to be among the weaker segments for retailers, as three of the top retailers in the United States reported mixed results for May.

Saks Incorporated experienced the strongest growth in the four-week period ended June 2, as Mother’s Day boosted sales. The company warned that management expects June comparable store sales to be negative thanks to weak consumer demand. Saks reported that May 2007 sales rose 39.4 percent to $248.9 million.

Similarly, retailer J.C. Penney reported that jewelry sales were among the weaker performing products in May, along with women’s accessories and home categories. Clothing lines across the board were the stronger sellers during the month.

Sales at J.C. Penney were relatively flat for the four weeks ended June 2, as department store sales increased 0.3 percent to $1.19 billion, while comparable department store sales decreased 2 percent. Direct sales were down 5.1 percent to $186 million, bringing total company sales in May to 1.37 billion, or 0.4 percent lower than the comparable period in 2006.

Macy’s Inc. (formerly Federated Department Stores) reported that total sales dropped 2.3 percent to $1.976 billion for the four weeks ended June 2. On a same-store basis, Macy’s sales were down 3.3 percent in May.


Last year set a new record for “retail shrinkage”—that is, inventory lost through theft, shoplifting and fraud—according to a recently released survey by the National Retail Federation and the University of Florida. But while the dollar amount was the highest ever in 2006, the total as a percent of all retail sales was about the same as in 2005, roughly 1.61 percent.

Almost half of all retail losses ($19.5 billion worth, or 47 percent) were due to employee theft, the survey found. Shoplifters made off with another $13.3 billion, or 32 percent of all losses. Stores also lost inventory through administrative error ($5.8 billion or 14 percent) and vendor fraud ($1.7 billion or 4 percent). The most vulnerable product categories were cards, gifts and novelties; specialty accessories; crafts and hobbies; and supermarket and grocery items. “When criminals steal from retailers, consumers pay higher prices, the safety of innocent employees can be compromised and shoppers looking for popular merchandise often cannot find it,” said Joe LaRocca, National Retail Federation’s vice president of loss prevention. Retailers have been fighting back, investing in new technologies to deter, detect and convict criminals. According to the survey, most retailers’ loss prevention systems include burglar alarms (95.7 percent), visible closed-circuit televisions (87.1 percent) and digital video (84.9 percent). Retailers also conduct check screening (60.4 percent) and use armored cars (69.8 percent), point-of-sale data mining software (69.1 percent) and hidden closed-circuit televisions (57.6 percent).


The high cost of gasoline has U.S. consumers making fewer trips to retail outlets but continuing to spend on retail goods (such as jewelry, clothing and electronics), reports the International Council of Shopping Centers (ICSC). Sixty percent of 1,000 households surveyed in June reported that they shopped less frequently to preserve fuel, but did not reduce their overall discretionary spending.

When consumers did scale back their discretionary spending, the first thing to go was restaurant meals. Twenty-six percent of households reduced their restaurant expenditures, followed by 23 percent who cut back on travel, 12 percent who spent less on entertainment and 11 percent who bought less clothing and shoes.


De Beers in June launched a retail diamond website for the U.S. market—and if all goes according to plan, it will soon follow up with dedicated sites aimed at Japanese and European consumers.

DeBeers.com is De Beers’ first foray into online commerce. Marketing director Neal Sussman said he has two goals for the site: generating online revenue and increasing foot traffic in retail stores.

The site uses Venda ImageWare software to allow customers to rotate the images of the jewelry by a full 360 degrees and to zoom in for a closer look at specific parts. Customers also can search the site for a specific product, price, gold color or carat weight.

In other news, De Beers LV is planning to open its fourth retail store in the United States, a 1,350 square-foot diamond boutique, at the Galleria in Houston, Texas, late in 2007. The store will carry featured De Beers collections, bridal and high-end diamond jewelry. The other De Beers stores are in New York City, Beverly Hills and Las Vegas.


A survey of the wealthiest consumers in the United States ranked Bergdorf Goodman as the country’s “most prestigious traditional luxury retail brand.”

The 2007 Luxury Brand Status Index (LBSI) survey, conducted by the New York City-based Luxury Institute, asked 1,500 wealthy consumers to rate eight traditional luxury brands, including Barneys, Bergdorf Goodman, Bloomingdale’s, Brooks Brothers, Neiman Marcus, Nordstrom and Saks Fifth Avenue. Respondents have an average income of $319,000 and an average net worth of $3 million.

Bergdorf Goodman ranked as the favorite, while its parent company, Neiman Marcus, came in second, and Nordstrom a close third. Although not on the list, Internet retailer Vivre also scored high marks across the board.

“This category’s rankings are generally stable, although the addition this year of ratings for the growing luxury e-tailer category changes the overall ratings dynamics significantly,” said Milton Pedraza, chief executive officer of the Luxury Institute.


Tokyo’s trendy Shinjiku district will soon be home to a new Tiffany & Co. store devoted exclusively to jewelry and accessories for men. The new boutique, Tiffany & Co. The Men’s Store, will be located in the Isetan Department Store.

The New York-based jeweler will introduce new pieces specifically for the all-male store, including a new collection featuring the Tiffany Lucida diamond in a white gold setting and designs by Paloma Picasso, Elsa Peretti, Jean Schlumberger and Frank Gehry.

Three other Tiffany stores opened this year, in Santa Barbara, California; Providence, Rhode Island; and London.


Cartier and Condé Nast Interactive have struck a deal that will put ads for the “Cartier Love” jewelry line on mobile-phone versions of GQ and Glamour magazines throughout the month of June. Cartier is the first luxury brand to sign on to advertise on the “mobizines,” which bring mini-versions of magazines to subscribers’ mobile phones.


British luxury goods promoter Walpole has named AstleyClarke.com as one of only six “Luxury Brands of Tomorrow,” citing the company’s high-quality designer jewelry and old-fashioned service.

Though only a year old, Astley Clarke already has built a roster of high-profile clients, including professional athletes and politicians, as well as actress Nicole Kidman. Walpole, meanwhile, helps promote the British luxury industry through partnerships with more than 100 of its best-known brands, including Burberry and Herrod’s.

The other five companies Walpole named “Luxury Brands of Tomorrow” were the Bremont Watch Company, bookmaker Fitzdares, perfume maker Miller Harris, Nyetimber sparkling wine, and Persephone Books, which reprints rare twentieth-century books by women writers.

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