RAPAPORT...
CPI for Jewelry Keeps Climbing
The consumer price index (CPI) for jewelry in the U.S. rose 2.6 percent year-on-year to 157.97 points during the month of April, according to data provided by the Bureau of Labor Statistics (BLS). The index was slightly higher than it was in March and has now topped 150 points for 15 consecutive months. Prior to this run, the index had not hit 150 points since February 1998.
For the watch and jewelry categories combined, the index for April increased 2.5 percent to 150.1 points, the highest it has been since October 1996. The monthly index is based upon a reference point of average prices in 1986, which is set at 100 points.
Signet’s Sales Decline
Sales continued to erode at retail jeweler Signet during its first quarter that ended May 2, 2009. Signet reported that total sales dropped 7 percent to $762.6 million and same-store sales fell 3 percent. Terry Burman, group chief executive, explained that Kay Jewelers achieved an increase in same-store sales, while Jared the Galleria of Jewelry was adversely affected by the general weakness in spending among households with above-average incomes. Sales in the U.S. fell 1 percent and same-store sales dropped 3 percent.
Finlay Reports Loss, Revolving Credit Default Finlay Enterprises posted a net loss of $107.3 million for its fiscal year that ended January 31, 2009, an expansion of the loss of $10 million reported one year ago, and its assets fell 23 percent to $567.6 million. As part of its strategic plan, the group sold its Bloomingdale’s assets in March for $33.4 million and recorded a pretax charge of $58.9 million for assets impairment and inventory write-down, including a loss on the sale of inventory to Bloomingdale’s.
Finlay also reduced its senior secured revolving line of credit from $550 million to $266.6 million in March, but the agreement requires the company to comply with milestones in connection with the strategic plan. “We are in default of certain covenants under the revolving credit agreement. These uncertainties raise substantial doubt about our ability to continue as a going concern,” the firm explained in a statement.
The company’s sales rose 5 percent to $754.3 million. Finlay reported sales of $444.6 million from department store-based jewelry counters, a drop of 10 percent from one year ago, while almost $310 million in sales came from specialty jewelry stores during the fiscal year, up from $223.8 million. Finlay is exiting the department store business model this year and announced that it plans to close approximately half of its specialty jewelry stores in 2009.
Richemont’s Profits Tumble
Richemont reported that its net profit fell 31 percent to $1.5 billion (EUR 1.1 billion) for the fiscal year that ended March 31, 2009, reflecting weakness in its luxury business. Sales rose 2 percent to $7.4 billion (EUR 5.4 billion) due to a strong first half of the year, when sales grew 10 percent. The company noted that sales declined 5 percent in the second half.
The company’s jewelry maisons group, which includes Cartier and Van Cleef & Arpels, was the only segment to register an increase in operating profits, up 2 percent to $1.1 billion (EUR 777 million). Richemont’s watchmaking business saw profits drop 23 percent to $390 million (EUR 287 million). Jewelry sales rose 4 percent to $3.8 billion (EUR 2.8 billion), while watch sales increased 4 percent to $2 billion (EUR 1.4 billion).
Richemont also announced that Norbert Platt, chief executive officer (CEO), will retire at the end of 2009 after five years in the position. At press time, no replacement had been named.
Sotheby’s Shrinking Sales Cause Job CutsSotheby’s first-quarter revenue fell 58 percent to $54.4 million, which the auction house attributed to a 71 percent decline in net auction sales. The firm’s net loss for the first quarter increased by 178 percent to $34.5 million, or 53 cents per share. The first and third quarters are typically loss quarters for Sotheby’s.
Though Sotheby’s reduced its operating expenses 25 percent during the quarter, the firm conducted an additional strategic review of its operations that resulted in a plan to reduce headcount by 20 percent for an annual cost savings of approximately $24 million. Overall, restructuring plans and other cost-cutting measures are expected to produce savings of over $160 million in 2009.
Standard & Poor’s (S&P) lowered its corporate credit rating for Sotheby’s from “BBB-” to “BB-”, giving the firm a “negative” outlook based on the expectation that the auction house’s weak performance will continue through 2009.
Blue Nile’s Sales DropBlue Nile’s sales decreased 11 percent to $62.4 million for the first quarter, which ended April 5, 2009, the etailer reported. However, its cost of sales dropped 13 percent to $49.2 million and its gross profit as a percentage of sales rose 140 basis points to 21 percent.
QVC Shoppers Turn Away from JewelryQVC’s consolidated first-quarter revenue was down 10 percent to $1.6 billion, while its products sold shifted away from the jewelry category to home products and, to a lesser extent, accessories, parent company Liberty Interactive group reported. QVC’s U.S. revenue fell 10 percent to $1.1 billion, but the average selling price rose 6 percent from $48.09 to $51.07.
Bulgari Posts Loss
Bulgari Group reported a net loss of $40 million (EUR 29.3 million) for the three months that ended March 31, 2009, compared with a net profit of $31.1 million (EUR 22.8 million) one year ago. The luxury retailer’s first-quarter sales fell 23 percent to $243.3 million (EUR 178.1 million).
U.S. Department Store Sales Sag U.S. department store sales fell 6.1 percent in April 2009, compared with one year ago, to $15.9 billion, according to the latest government figures. The U.S. Census Bureau, which calculates monthly sales estimates, reported that retail sales decreased 11.4 percent to $299.5 billion.
Saks In The Red
Saks Incorporated posted a net loss of $5.1 million for its first quarter that ended May 2, 2009, compared with a profit of $17.3 million one year ago. Sales fell 27 percent to $621.3 million, while its comparable store sales dropped 28 percent. Saks reaffirmed its expectations that comparable store sales for the full fiscal year would decline by low double digits.
Macy’s Loss WidensMacy’s reported a loss of $88 million during its first quarter, compared with a loss of $59 million one year ago. The department store took $138 million in restructuring charges during the quarter that ended May 2, 2009. Sales fell 9.5 percent to $5.2 billion and same-store sales dropped 9 percent. Online sales were the bright spot, as they rose 16 percent.
Macy’s completed its organizational restructuring during the first quarter and rolled out its new “My Macy’s” initiative. Terry J. Lundgren, Macy’s chairman, president and chief executive officer (CEO), stated that the retailer expects to benefit from approximately $400 million of annual expense savings beginning in 2010 and $250 million in the remainder of 2009.
Hong Kong’s Retail Sales SlumpHong Kong’s retail sales fell 8 percent in March, compared with a year earlier, to an estimated $2.7 billion (HKD 20.8 billion), according to the government’s Census and Statistics Department. Declines in the sale of jewelry, watches, clocks and valuable gifts were in line with the average, falling 10 percent by volume during the month, compared with 2008.
Article from the Rapaport Magazine - June 2009. To subscribe click here.