Rapaport Magazine

Retail Bulletin

Zale Sells Bailey Banks & Biddle

By Rapaport
RAPAPORT... Zale Corporation sold its Bailey Banks & Biddle stores to Finlay Enterprises for $200 million during the third quarter, giving Finlay a third stand-alone jewelry brand in addition to Carlyle and Congress. Finlay expects its newly acquired assets to generate sales between $280 million and $300 million for the fiscal year concluding January 31, 2009.

Zale experienced an approximate 27 cent per share reduction in earnings expectations as a result of this sale, with earnings from its continuing operations expected to range from $1.60 to $1.65 per diluted share. Cash from its warranty sales, however—excluding Bailey Banks & Biddle—increased $9.5 million during the first fiscal quarter of 2007.

The corporation’s net loss from discontinued Bailey Banks & Biddle operations was $1.7 million or four cents per share. Total revenues for the fiscal first quarter ended October 31 were $377 million compared to $382 million last year, a 1.3 percent decrease. Same-store sales are forecasted to remain flat at best.

Zale also recently entered a $100 million accelerated share repurchase agreement with JPMorgan as part of its $200 million stock repurchase program.

Finlay Sales On the Rise

Finlay Enterprises, Inc., which runs stand-alone specialty jewelry stores and licensed fine jewelry counters, reported that its third quarter sales rose 4.1 percent to $141.9 million. The company experienced a net loss of $7.5 million, or 82 cents per share, on a consolidated basis in this quarter, a slight improvement from the $8.4 million loss reported one year ago.

Finlay’s sales for the nine months ended November 3 increased 5.3 percent to $452.3 million, compared to $430 million last year. The company reported a continuing operations loss of $23.7 million, or $2.61 per share, during this period.

Specialty jewelry stores generated sales of $77.9 million for the nine-month period, up from $56.5 million in 2006, and comparable store sales for the period increased 2.1 percent on a continuing operations basis.

Richemont Earnings Soar

Luxury retailer Richemont reported that first-half sales rose 11 percent to $3.74 billion (€2.548 billion), but the weak dollar hurt revenue growth. For the six months ended September 30, 2007, operating profit increased by 28 percent to $821 million (€560 million). Profits rose 28 percent to $1.2 billion (€823 million).

Further weakening of the average EUR to USD in the six-month period reduced sales growth by about 13 percent in dollar terms to 6 percent in euro terms. Sales in the United States rose 4 percent to $573 million (€391 million). The weakening dollar and yen may slow second-half growth in the United States and Japan by 3 percent to 7 percent, Richemont spokespersons warned.

Signet Sales Up

The world’s largest jewelry retailer, the Signet Group plc, registered a 10 percent increase in sales at $678.7 million for the third quarter of 2007. The increase was 7.9 percent at constant exchange rates.

Same-store sales rose 3.2 percent for the quarter ended November 3, 2007, but its Ernest Jones brand store rose 6.5 percent.

Sales in the United States rose 10 percent to $488.1 million and same-store sales rose 2.5 percent. Signet reports in dollars now, so due to the dollar’s drop against the British pound, sales increased by only 2.7 percent in the United Kingdom. In dollars, sales rose 10 percent.

For the first three quarters of fiscal 2007, sales have increased 9.4 percent to $2.281 billion, reflecting an underlying increase of 7 percent at constant exchange rates. Due to the strong British pound, sales in the United Kingdom have risen 13 percent in dollars, but 3.4 percent in local currency, and same-store sales are up 4.7 percent. Sales across the United States have risen 8.3 percent to $1.7 billion and same-store sales are up 2.7 percent.

However, third quarter profits fell 69 percent to $1.6 million in the third quarter of fiscal 2007, as Signet bore the brunt of higher diamond, gold and platinum costs. For the year to date, profits declined 3.2 percent to $70.8 million.

U.S. Online Jewelry Sales Up

Jewelry and watches again proved to be among the top five hottest categories for internet shoppers in October 2007, as online sales grew 26 percent compared with one year ago.

A survey by network research company comScore showed that total retail sales – excluding auctions and large corporate purchases – increased 19 percent to $9.9 billion in October, a growth rate that was slightly slower than the average of 21 percent so far in 2007. For the first ten months, online retail sales reached $93.55 billion.

Bulgari Sales Rise

Luxury product group Bulgari SpA reported that revenues grew 8 percent to approximately $377.5 million (€258 million) in the third quarter of 2007, boosted by a strong performance in its core jewelry business. Net income for the three months ended September 30, 2007 rose 19.6 percent to $59.7 million (€40.8 million).

Bulgari jewelry sales rose 14 percent to $154.1 million (€105.3 million), which represented a 19 percent increase when comparable foreign exchange rates were factored in.

For the first nine months of 2007, Bulgari reported that total sales increased by 8.6 percent to $1.09 billion (€745.6 million). Jewelry sales rose 14.5 percent to $455.9 million (€311.7 million). Net income for January through September grew 26 percent to $144.9 million (€99.1 million).

Sotheby’s Revenues Up

Sotheby’s financial results for the third quarter ended September 30, 2007, showed that revenues increased 48 percent to $85.1 million. Despite the increase, Sotheby’s incurred losses on certain auction guarantees. Historically, the third quarter has often been in the red due to the seasonal nature of the marketplace. Sotheby’s reported a net loss of $20.948 million, an improvement from $30.727 million in the third quarter of 2006.

The company’s financial statement focused on the first three quarters. Operating revenues for the first nine months of 2007 set a new record at $572 million, which was up 42 percent from 2006. Profits rose 200 percent to $110.7 million. Sotheby’s results for those first nine months were affected by a one-time benefit of $20 million related to an insurance recovery, and a $4.8 million gain on the sale of a former Billingshurst salesroom property in the United Kingdom.

Blue Nile Sales, Profits Up

Online diamond retailer Blue Nile reported that sales increased 26 percent to $67.4 million during its third fiscal quarter, ended September 30, 2007.

Operating income rose 67 percent to $3.6 million, and net income grew 63 percent to $2.97 million.

Company spokespersons forecast fourth quarter sales of between $109 million and $115 million. This would mean full-year sales of between $316 million and $322 million.

Property Sale Drives Tiffany Earnings Growth

Tiffany & Co. recorded an 18 percent increase in sales to $627.3 million for the third quarter ended October 31, 2007.
Same-store sales grew 8 percent in the United States and 10 percent across the international marketplace.

For the first nine months of Tiffany’s fiscal year, sales have risen 18 percent to $1.9 billion, and same-store sales have risen 10 percent.

Net earnings from continuing operations rose 208 percent in the third quarter to $100.5 million, or 72-cents per diluted share, up from $33 million one year ago. Year-to-date profits have risen 64 percent to $185.5 million, or $1.33 per diluted share.

In third quarter, sales in the United States rose 12 percent to $303 million. Tiffany’s flagship store in New York benefited from tourists as sales rose 28 percent the company stated.

Wholesale diamond sales rose to $12.5 million, helping to boost the “other” sales category 137 percent to $22.4 million during third quarter.

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

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