RAPAPORT...
DTC’s May Sight Shows Improved Demand
The Diamond Trading Company’s (DTC) May sight had an estimated value of $250 million, as sightholders showed more enthusiasm for rough, while the availability of De Beers goods was limited. The sight’s value was 25 percent higher than the March/April sight estimate, but still 62 percent lower than one year ago.
DTC sales are expected to fall by about 50 percent based on the 2009 intentions to offer (ITOs), which indicate sightholders’ forecasted buying needs for the current ten-sight period. DTC sales have fallen 73 percent in the first four sights of the calendar year to $660 million, according to Rapaport News estimates.
Louise Prior, DTC spokesperson, explained that DTC has introduced a new allocation mechanism to make goods that are not in the ITOs available to sightholders. She stressed that these goods were offered across the board to sightholders, dismissing claims that the company was taking sightholders’ buying histories into account when allocating outside of ITOs or giving preference to “loyal” sightholders who purchased goods in the difficult period that began in November 2008.
Observers noted a slight price adjustment of up to 2 percent for mainstream goods. Smaller, better-quality Indian goods rose about 6 percent, according to reports.
Prior declined to comment on prices. She noted, however, that DTC would not provide quarterly price updates as it did in 2008.
Clark’s Files for Bankruptcy
Clark’s Fine Jewelry, based in Wichita, Kansas, filed Chapter 11 bankruptcy, the Wichita Eagle reported. Court documents show that the company has $1.6 million in assets and more than $1 million in liabilities. Several other parties are also suing the company for money owed. In April, Legacy Bank filed suit to foreclose on Clark’s, contending that the company had stopped making payments on its loan and still owed $250,000 in principal, interest and fees, according to the newspaper. The Kansas Department of Revenue filed a tax warrant against the jeweler in August for unpaid sales tax and the Internal Revenue Service (IRS) filed a tax lien for $63,000 in unpaid taxes in 2008 and 2009, the newspaper noted. Supplier Stoneage International also filed suit against Clark’s in February, claiming it is owed $41,000. — Additional reporting by Acquire Media.
Bidz.com Accused of Securities FraudThe law offices of Howard G. Smith filed suit against Bidz.com on behalf of those who purchased its common stock (BIDZ) between August 13 and November 26, 2007, alleging that Bidz.com “violated federal securities laws by issuing material misrepresentations to the market concerning its business, operations and prospects.”
While no plaintiff class has yet been certified, Smith’s statement explained that those who purchased shares during that period can move for lead plaintiff status by July 6, 2009.
Barrack, Rodos & Bacine filed a class-action lawsuit covering the same period, charging Bidz.com and its chief executive with violations of the Securities Exchange Act of 1934. In a company statement, Bidz.com said it “believes the plaintiffs’ claims are entirely without merit.”
In related news, Bidz.com reported net revenue of $13.2 million for its first quarter, down 50 percent from one year ago. Gross margins grew to 32.7 percent from 29.1 percent year-over-year.
Former Friedman’s CEO Sentenced to 12 Years A New York district court sentenced Bradley Stinn, the former chief executive officer (CEO) of Friedman’s Inc. and Crescent Jewelers, to 12 years of imprisonment for securities fraud, mail fraud and conspiracy. The sentencing comes just over a year after
a jury found Stinn guilty of the charges.
Stinn led a multiyear securities fraud scheme that inflated Friedman’s reported financial performance and hid the serious problems the company was having collecting hundreds of millions of dollars it was owed for jewelry it had sold on credit, according to the court statement. The scheme resulted in Friedman’s shareholders losing more than $20 million.
Several months after the announcement of the government’s investigation in November 2003, Friedman’s stock was delisted from the New York Stock Exchange (NYSE). Friedman’s reorganized in 2005 and ultimately liquidated in April 2008.
Fortunoff to Auction Intellectual PropertyFortunoff’s intellectual property assets will be auctioned on June 18, 2009 by intellectual property management firm CONSOR. The bidding deadline is June 16, with a sale approval court hearing scheduled for June 22.
Fortunoff’s asset portfolio includes certain trademarks, website domain names, customer databases, the retailer’s bridal registry, exclusive jewelry designs, training materials, knowledge databases and IT systems. The customer databases contain over 750,000 customer names, many of which offer detailed purchase histories for jewelry, home furnishings and bridal registries. More than 3,500 exclusive jewelry designs will be auctioned, including the following collections: Petra, House 533, House 511, House 513 and Avignon branded Swiss watches.
Sarin Technologies’ Sales TankSales for diamond in-dustry toolmaker Sarin Technologies plummeted in the first quarter of 2009. Revenues fell 90 percent compared with 2008 to $1.1 million for the three months that ended March 31, 2009. The company reported a net loss of $2.5 million, compared with profits of $2 million a year earlier.
Sarin reported that revenues from its biggest market, India, fell 91 percent to $720,000, while at its Africa operations, they declined 95 percent to $38,000. In North America, revenues dropped 90 percent to $46,000 and in Europe, they were down by 93 percent to $47,000. In its other markets combined, Sarin saw a 71 percent decline in revenues to $212,000. The company cut its spending on research and development by 42 percent, its selling and marketing costs by 41 percent and general expenses by 50 percent.
Sarin has a 23 percent stake in Idex Online, which posted a loss of less than $50,000 during the quarter. Sarin’s share of the loss amounted to $10,000, the company noted.
Ban on Myanmar Rubies Impacts ThailandAnthony Brooke, deputy director for public relations of the Thai Gem & Jewellery Traders Association (TGJTA), is working to alleviate the negative impact that the U.S.’s Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act is having on local exports, The Nation reported. A veteran in the industry with his own jewelry trading business in Thailand, Brooke says the U.S. economic recession and its recent enforcement of the Tom Lantos Block Burmese JADE Act has led to a 40 percent year-on-year plunge in Thai shipments in the first quarter of this year.
The Thailand Foreign Ministry is working with the TGJTA to help negotiate a review of the law, which was enforced beginning in September 2008, since it is having a negative impact on the export of Thai gems and jewelry to the U.S. market, according to The Nation. Rubies and other Burmese gemstones account for about 20 percent of the raw materials used by the Thai jewelry industry. — Additional reporting by Acquire Media.
CIBJO Lets Commercial Entities VoteThe World Jewellery Confederation (CIBJO) concluded its 2009 congress in Istanbul, Turkey after unanimously voting to extend voting rights to members representing commercial entities, while preserving the preeminent role of national associations, according to a statement from CIBJO.
Dr. Gaetano Cavalieri was reelected as CIBJO president. Other senior office holders elected were Richard Peplow, vice president; Roland Naftule, vice president; and Marc-Alain Christen, chief financial officer (CFO). Elected as office holders in CIBJO’s diamond commission were: Udi Sheintal, diamond commission president; Jon Phillips, diamond commission vice president; and Yang Li Xin, diamond commission vice president.
Sheintal proposed the creation of an industry-wide working group to reach a consensus on nomenclature for gem-quality synthetic diamonds. In addition, the CIBJO Association Executive Networking Commission (AENCOM) was created to develop strategies to continually connect national jewelry association executives with the CIBJO community.
The “Retailers’ Reference Guide: Diamonds, Gemstones, Pearls and Precious Metals” by CIBJO’s Marketing and Education Commission was also released at the congress. This guide will be available online, as well.
JA Revises Guidance on Conflict Diamonds, GoldJewelers of America (JA), the national trade association for businesses serving the fine jewelry retail marketplace, revised its member guidance documents on both conflict diamonds and responsible gold, according to a statement from the group. JA sent the revised materials to members in two separate packets, along with “What You Need to Know,” “What You Need to Do” and “Talking Points” sheets. The packets also include a “Responsible Gold Sample Policy Statement” and a “Sample Conflict Diamonds Policy Statement” that members can cut and paste onto their own letterhead, display in-store and post on their websites. Members may access the updated documents by logging into the members-only section of JA’s website, www.jewelers.org.
Chairman of Sanghavi Exports DiesVasantlal Sanghavi, chairman of Sanghavi Exports International, died of a heart attack on May 16 at his home in Mumbai, India at the age of 63. Sanghavi and his brother Chandrakant were scheduled to be honored with a Lifetime Achievement Award by the Indian Diamond & Colorstone Association (IDCA) at the JCK Show on May 30.
Sanghavi oversaw the growth of his firm from 15 employees to a Diamond Trading Corporation (DTC) sightholder with over 10,000 workers while he and his family participated in various philanthropic activities, including training students at the Indian Diamond Institute (IDI), setting up schools and working to prevent cruelty to animals.
Belgian Banks Agree to Provide Credit to Diamond Trade
Antwerp’s diamond banks agreed to provide new credit facilities to Antwerp’s diamond dealers up to a maximum of $1.4 billion (EUR 1 billion) for a period of two years in exchange for stock collateral under existing credit conditions, pending approval from the Belgian Banking, Finance and Insurance Commission (CBFA), according to a statement from the Antwerp World Diamond Centre (AWDC).
AWDC, as the official representative of the Antwerp diamond sector, will be in charge of the securities valuation and the transparency of the operation. AWDC requested a temporary additional guarantee of $272 million (EUR 200 million) from the Flemish government to restore confidence in the diamond sector.
NYC’s International Gem Tower Begins ConstructionAfter many delays, the first phase of construction of the International Gem Tower (IGT) on West 47th street in New York City’s diamond district is finally set to begin. During a press conference, Mayor Michael Bloomberg and Gary Barnett, president of Extell Development Company, explained that the long-promised IGT aims to provide a state-of-the-art condominium facility for 250 gem and jewelry wholesalers, retailers, manufacturers and designers that would compete with diamond centers in cities such as Dubai, Shanghai and Las Vegas.
Construction crews will build three floors underground for parking and secure vault space over the next six to nine months, John Livingston, president of Tishman Construction, which is building the IGT, stated. Livingston estimated that the 34-floor tower will be ready for its first tenants by mid-2011.
Extell has been offered incentives by the Bloomberg administration as part of
the city’s Five Borough Economic Opportunity Plan. If 85 percent of the building is filled with diamond and jewelry-related tenants and 50 percent of its tenants are new or newly expanding businesses, Extell will be eligible for city and state tax benefits totaling $49.6 million.
Barnett reported seeing “very good demand from foreign-based companies. And we definitely have people who are interested in taking larger offices.”
A statement from the city noted that the IGT will create about 3,000 permanent jobs in the jewelry industry once it is completed. The project is expected to cost approximately $750 million.
Article from the Rapaport Magazine - June 2009. To subscribe click here.