Retail Bulletin

RAPAPORT... Signet Profits Up

Thanks in part to a strong performance and continued growth in its operations in the United Kingdom, Signet Group reports that its profits for the second quarter of fiscal 2007 grew 9 percent to $36.7 million. For the 13 weeks ended August 4, total sales increased 7 percent to $787.4 million. Within that overall picture, quarterly sales at the H. Samuel and Ernest Jones outlets in the United Kingdom, the Channel Islands and the Republic of Ireland grew 15 percent to $202.8 million. According to company spokespersons, sales of watches and diamonds were driving forces behind the good performance in the United Kingdom.

These sales partly explain why Signet’s net profits for the fiscal year to date have climbed 1.8 percent to $69.2 million. The strong showing is expected to continue and pick up further as the Christmas period approaches.

Whitehall Sales Down

Chicago-based Whitehall Jewelers Holdings, Inc. reports a loss of $18.3 million for the second quarter ended August 4, 2007. This loss, reflected in sales and same-store sales, represents a 42 percent expansion from the $12.8 million loss experienced a year before.

For the second quarter, sales dropped 5 percent to $52.5 million, while same-store sales went down 1 percent. An 11 percent drop in the average selling price per item, offset by an 11.3 percent rise in unit sales, nevertheless drove down comparable store sales.

Sales fell 2 percent, to $113.2 million, for the first fiscal half of 2007. The company experienced a net loss of $33.1 million, a 37 percent greater loss than one year ago. In the first half, comparable store sales dropped 2.4 percent.

Richemont Revenue Grows

Luxury goods operator Richemont had a strong August, with sales growing 6 percent in North America, 14 percent in Europe and 22 percent in Asia. The company’s total revenue from April through August grew 11 percent, with about 40 percent of all revenue deriving from sales in Europe.

Revenue from the sale of watches grew 20 percent in the five-month period ended in August. Watches are a crucial part of Richemont’s operations, and the company has made a deal to purchase the production facility of Roger Dubuis SA, a watch manufacturer based in Geneva. Although Richemont did not divulge the terms of the agreement, this deal ties in with Richemont’s plans to distribute Roger Dubuis watches throughout the United States and the Middle East.

Bulgari Profits Rise

The first half of fiscal 2007 was a good period for luxury retailer Bulgari SpA, according to a company report, which states that profits increased 32 percent to $81 million (€58.4 million).

In the first half, strong demand for jewelry and watches drove sales up 15 percent to $676 million (€487.8 million). Sales of accessories fell 8 percent. Francesco Trapani, Bulgari’s chief executive officer (CEO), expects sales and profits to grow 12 percent for the year.

Raw material expenses, dividend payments and the need to enlarge inventories in preparation for the coming holidays drove Bulgari’s debt up 230 percent to $215 million (€155 million).

Number of Wealthy Households Up

The number of wealthy American households rose 51 percent from 2002 to 2006, according to a segment of the 2006 American Community Survey, published by the New York-based Luxury Institute. From a plateau of roughly 5,000,000 in 2002, the number of households with an annual income of $150,000 or more hit 8,000,000 in 2006 – a total representing about 7 percent of all households in America.

The survey provided both ethnic and geographical breakdowns of the data. Of all the households with a total income of at least $150,000, 6.5 million fall in the category of Caucasian, 312,000 are African-American, 372,000 are Hispanic, and 527,000 are Asian. By a wide margin, California is the wealthiest state, with no fewer than 1.3 million rich households, while New York can boast 668,000 wealthy households.

United States Sees Mixed Retail Sales

August was a slow month for the major U. S. chain stores. Because of uneven retail sales, the International Monetary Fund estimates only a 2 percent growth rate for the United States in 2007. By comparison, the United Kingdom is expected to see 2.9 percent growth, and the figure for the European Union is 2.6 percent.

The tepid growth is not surprising given that consumer spending accounts for 70 percent of U.S. economic growth, and that retailers – including those offering diamond jewelry – clearly did not escape the summer slump. U.S. Commerce Department figures show consumer spending in July to have been flat at 0.4 percent.

Same-store sales for the chains increased roughly 2.5 percent, a smaller increase than one year ago, when the chains’ same-store sales were up 3.8 percent.

In the category of August retail sales, only Saks department stores enjoyed solid growth. Comparable store sales for Saks Incorporated underwent an 18.2 percent increase in August, according to figures released by the company, while total sales rose 19.8 percent to $213.5 million.

Macy’s, Inc. saw same-store sales grow 2.4 percent, while the company’s total sales increased 3.7 percent to $1.79 billion for August. Same-store sales for Nordstrom, Inc. grew 6.6 percent, and its total sales increased 12.6 percent to $582.3 million. JCPenney’s same-store sales dropped 4 percent, while total sales fell 1.1 percent to $1.56 billion.

For the nation’s biggest retailer, Wal-Mart, same-store sales were up 3.1 percent from one year ago, while total sales increased 9.3 percent to $28.22 billion.


Breeden Capital Buys Zale Shares

Breeden Capital Management, an investment fund, purchased a 7.7 percent stake in the Zale Corporation for roughly $83.57 million, according to a filing with the United States Securities and Exchange Commission.

Acting on the belief that the shares are “undervalued in the marketplace,” Breeden acquired the 3,784,639 shares for the purpose of investment. Representatives of the investment fund – who claim that they have no intention of acquiring control of Zale – have been engaged in talks with the latter corporation’s board of directors regarding jewelry retail operations, and they expect these discussions to continue.

Hong Kong Retail Sales Up

During July, Hong Kong’s retail sales value increased by 14.2 percent to about $2.74 billion (HKD 21.3 billion) compared to the same period a year ago, as indicated by official figures.

Hong Kong is importing increasing quantities of diamonds from Israel and other countries, and Hong Kong’s retail sales provide a good indication of the volume that it takes in.

The Hong Kong Census and Statistics Department further revealed that the total retail sales volume climbed 12.1 percent, attributing this increase to a number of factors, including rising wages, a vibrant stock market, a surging influx of visitors and an overall optimism on the part of consumers. In the quarter ended in July, the total retail sales volume rose 5.9 percent. Though not quite as hot a commodity as motor vehicles and parts, jewelry, watches and other luxury goods rode the groundswell of consumer optimism to claim a significant part of overall retail sales.

In the first seven months of the year, total retail sales increased 7.9 percent in volume, or 10 percent in value, compared with the same period a year earlier.

Article from the Rapaport Magazine - October 2007. To subscribe click here.