Rapaport Magazine

Retail Scope

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.

By Rapaport
RAPAPORT... Stimulus Checks fail to spur Jewelry Sales

Wal-Mart, the nation’s largest retailer, reported that June’s comparable store sales were bolstered by the government’s stimulus checks. Consumers bought mainly food, entertainment and personal care goods, with jewelry sales and housewares as the worst performers at the company’s Sam’s Club stores. Same-store sales also rose 9 percent at Costco, 16.5 percent at BJ’s, 0.4 percent at Target and 2.3 percent at Kohl’s.

Retailers specializing in apparel, jewelry and housewares found that June same-store sales dropped: Bon-Ton’s fell 6.5 percent, Dillard’s decreased 5 percent, Nordstrom’s declined 18.6 percent and Neiman Marcus’s fell 2.4 percent. J.C.Penney stated that jewelry sales continued their soft performance, while its same-store sales fell 2.4 percent. Same-stores sales at Saks Fifth Avenue rose 1.9 percent, with jewelry among its strongest categories, but the company warned that the second quarter would likely end with negative same-store sales.

Tough Christmas Predicted for Retail

Jay McIntosh, an analyst and director of consumer products at Ernst & Young LLP, told Rapaport News that even four months before the Christmas rush, rising food costs and energy inflation are raising concerns about how jewelry retailers will fare during the holiday season. McIntosh stated that consumers are already apprehensive about spending and Ernst & Young determined that food prices are rising faster than the consumer price index (CPI).

After mirroring the CPI for the three years ended in December 2007, food prices are now growing at a faster rate — 5.9 percent for the three months ended in May 2008, versus 4.9 percent for the overall CPI, according to the Bureau of Labor Statistics (BLS). Food’s CPI rose 5.1 percent through May 2008, per the BLS, but for the period from March through May, Ernst & Young determined that food inflation was up 6.2 percent. From May 2007 to May 2008, energy prices rose 17.4 percent and from March 2008 through May 2008, energy’s CPI was up 28.2 percent on an annualized basis, raising concerns over winter costs.

Wal-Mart Partners With Rio Tinto

Wal-Mart chose Rio Tinto to provide gold and silver for fully traceable, responsibly-produced jewelry. The deal is one aspect of Wal-Mart’s initiative to achieve 100 percent traceability for all of the gold and silver jewelry sold at its stores. Wal-Mart’s Love, Earth® collection will be produced with metals mined by Rio Tinto based on industry-specific criteria.

The project will initially focus on gold and silver jewelry using metal from Rio Tinto’s Kennecott Utah Copper (KUC) Bingham Canyon Mine in Utah. Customers will be able to trace their Love, Earth jewelry back to the mine it was sourced from online. Other suppliers for the initiative are Newmont Mining Corporation, a gold manufacturer headquartered in Denver, Colorado, and Aurafin, a Florida-based jewelry manufacturer.

Montblanc Commemorates Mandela

During a ceremony commemorating Nelson Mandela’s 90th birthday, Montblanc introduced the “46664” bangle in his honor to raise funds to prevent HIV/AIDS. The bracelet, named after Mandela’s prison cell number on Robben Island, is made by South African craftsmen of fair trade platinum, gold and silver and features a three-dimensional imprint of Mandela’s hand.

Montblanc anticipates selling 250,000 bangles a year through 2010. Each bangle will also be designated with a one-of-a-kind serial number to allow consumers to track how its specific funds will be applied to HIV prevention. The 46664 bangle will be available in the U.S. at select Montblanc boutiques in New York, Las Vegas, Miami, San Francisco and Costa Mesa, California.

NRDC Acquires Hbc

Fortunoff’s new parent company, NRDC Equity Partners, completed its acquisition of Hudson’s Bay Co. (Hbc) and consolidated Lord & Taylor, Fortunoff and Creative Design Studios under a holding company known as Hudson’s Bay Trading Company (HBTC). The three companies combined boast 75,000 employees, 55 million square feet of store space and annual retail sales of over $8 billion in the U.S. and Canada. NRDC expects to invest $500 million in new equity in the consolidated firm and plans to open ten to 15 Lord & Taylor stores in Canada.

DGSE Launches Direct Buy Site

DGSE Companies Inc. launched a website, www.DGSE.com, enabling it to purchase jewelry and precious metal products directly from online consumers. The company will offer these products to the public in real time for 36 hours. If the items are not sold in this time frame, they will be melted or disposed of for scrap value. Products are offered based upon their precious metals and other content at small premiums from the scrap value, without conventional retail markups. This “treasure hunt” will be an integrated component on the site and will showcase 150 items in a constant countdown to disposal. New items will be added each day to replace those that expire. To participate, register and click on the green “treasure hunt” symbol on the homepage.

Avalon and eDiamondselect Partner

eDiamondselect, a software provider for the diamond industry, has partnered with Avalon Solution, a web services firm created by Ashi Diamonds. Avalon helps retail jewelers establish a brand presence online. The partnership gives eDiamondselect’s current and future customers access to Avalon’s web building services.

Through Avalon, retailers can implement web templates, flash introductions, e-catalogs, online chat and live help, personalized emails and more than 1,000 of the latest jewelry styles available through Ashi. Avalon’s program also offers domain registration, web hosting services, Google analytics to evaluate visitor data, search engine optimization and search engine page ranking. Avalon will soon offer ecommerce capabilities, a loose diamond database, promotional email marketing and the integration of advertising and marketing materials. For more details, visit avalonsolution.com.

Zalemark Nixes Merger With Novori

Zalemark Inc. reported that it has called off a proposed merger with online retailer Novori Inc. In a letter to its shareholders, the diamond jewelry designer and manufacturer stated that it determined Novori was not a suitable partner during the due diligence and standstill agreement that expired July 10. The letter also stated that Zalemark has been approached by a well-known, though unnamed, jeweler for another prospective merger.

Jared to Open Second Store in Buffalo

Jared The Galleria of Jewelry expects to open its second location in Buffalo, New York, by early fall 2008. The jeweler will be one of a small group of retailers to open shop in the newly renovated Boulevard Consumer Square. Other newcomers include Eastern Mountain Sports, Old Navy Clothing Co., OfficeMax and Ultra Cosmetics.

Tiffany plans Second Toronto Store

Tiffany & Co. announced that it will open its second store in Toronto by the second quarter of 2009. The 6,200-square-foot location will be in Yorkdale Shopping Center. The store will offer Tiffany collections, including its diamond engagement rings; fine and sterling silver jewelry; the designs of Elsa Peretti, Paloma Picasso, Jean Schlumberger and Frank Gehry; watches; and gifts and accessories.

Article from the Rapaport Magazine - August 2008. To subscribe click here.

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