RAPAPORT... The consumer price index (CPI) for jewelry in the U.S. rose 4.1 percent year on year to approximately 161.3 points in August, which was the highest level to be recorded since June 1995. The reading, as tracked by the Bureau of Labor Statistics (BLS), marked the 31st consecutive month for which the jewelry CPI registered more than 150 points and the fourth month this year that it topped 160 points. The jewelry price index is based upon the reference point of average prices in 1986, which is set at 100 points. The CPI for all product categories rose 1.1 percent year over year for the month of August to 218.3 points.
Tiffany Posts Sales Gains
Tiffany & Co.’s revenue rose 9.2 percent year on year to $668.8 million during its second fiscal quarter that ended on July 31, 2010, while cost of sales was up just 2.5 percent to $282 million. The retailer’s net profit increased by 19 percent year over year to $67.7 million or 53 cents per share. Worldwide comparable-store sales were up 6 percent. By region and at constant exchange rates, net sales rose 7 percent in the Americas, 17 percent in the Asia-Pacific region and 25 percent in Europe. Net sales in Japan, however, fell 2 percent.
In the Americas — the U.S., Canada and South America — sales gained by 8 percent year on year to $350.4 million. The New York flagship store experienced a sales increase of 8 percent, while internet and catalog sales in the Americas declined 2 percent.
In the Asia-Pacific region, sales were up 21 percent year over year to $111.5 million, with the largest percentage growth recorded in China, Hong Kong, Macau and Korea. In Japan, sales rose 4 percent to $118 million. In Europe, sales increased by 14 percent to $76.9 million as other sales declined 19 percent to $11.9 million in the second quarter, due primarily to the lower wholesale sales posted for rough diamonds.
Tiffany’s gross margin increased to 57.8 percent in the second quarter from 55.1 percent one year ago. As of July 31, 2010, net inventories had risen by 1 percent compared with 2009. Tiffany repurchased 798,900 shares of its common stock during the quarter for a total cost of $32.9 million, or an average cost of $41.16 per share.
For the third quarter to date, Tiffany has observed that consolidated worldwide sales are growing at low double-digit percentage rates. Based on stronger second-quarter results and expected continued strength in its gross margin, Tiffany increased its annual net earnings outlook by a nickel to $2.60 to $2.65 per diluted share.
Harry Winston’s Revenue, Sales Soar
Harry Winston Diamond Corporation posted a 62 percent year on year increase in revenue during its second quarter that ended on July 31, 2010, with both the mining and retail segments posting strong gains. The mining division reported revenue of $86.8 million, an annual increase of 89 percent, and retail sales of $66.9 million, a 37 percent gain. Harry Winston reported a profit of $16.5 million, an improvement against the loss of $24.5 million it posted for the comparable period of last year.
Overall, Harry Winston improved its gross margin as a percentage of sales to 43.5 percent, up from 30.1 percent. The company earned $3.3 million from foreign currency gains, whereas one year ago, it reported a loss of $25.3 million. Rough diamond sales for the quarter rose due to both a 62 percent increase in rough diamond prices and a 17 percent increase in the volume of carats sold. Rough diamond production was 14 percent higher year on year at 645,000 carats. Harry Winston held three rough diamond sales during the second quarter, one of which was a tender.
The company’s cost of rough sales stood at $55.4 million, resulting in a gross margin of 36.2 percent compared with last year’s gross margin of 12.8 percent. The higher cost of sales was attributed to the cost of open-pit mining and the high cost of development ore used in underground mining at the Diavik site.
Harry Winston’s sales across Europe reflected a 40 percent year over year gain at $24.7 million, while its sales in Asia increased 40 percent to $22.6 million and its U.S. sales increased 31 percent to $19.6 million. The cost of sales for the retail segment totaled $31.4 million against the $26.2 million posted for the comparable period of last year. Gross margin for the quarter was $35.5 million or 53.1 percent versus 46.3 percent last year. The increase in gross margin resulted primarily from a more balanced product mix in salon sales and a greater proportion of higher margin watch sales, according to the company.
Harry Winston also announced the appointment of David Carey to its board. Carey currently serves as the president of Hearst Magazines. Prior to joining Hearst, Carey was group president at Conde Nast, where he was a member of the company’s executive committee and co-led all business development efforts.
Online Jewelry Sales Edge Up
MasterCard Advisors’ SpendingPulse, a macroeconomic report that tracks U.S. retail and service sales, noted that August sales in most categories recorded a slight year-over-year increase. Recent retail patterns, however, have trended more toward stable or flat comparisons.
SpendingPulse researchers determined that “volatile financial markets” negatively impacted the luxury sector and, to a lesser extent, jewelry sales in stores. Online jewelry sales, though, improved by 2 percent. Online sales growth slowed overall in August to reflect an increase of 7.2 percent, the smallest year-over-year increase to be posted so far in 2010.
Signet Taps BWise for Risk Management
Signet Group hired BWise to manage its risk and compliance management platforms. Implementing BWise software will enable Signet to replace its in-house tools and manual processes and standardize its risk management across its strategy, compliance, operations and finance divisions.
Evros Hadjisavva, Signet Group’s business risk assurance manager, explained, “It is a strategic choice for Signet to select an integrated governance, risk and compliance solution such as BWise. With a consistent and integrated overview in one platform, we are better able to manage the group’s key risks and assurance processes and enhance our board reporting capabilities.”
Robert Pijselman of BWise said that BWise’s process management approach is suitable not only to retailers, but for many other industries. Signet noted that it is also plans to utilize BWise’s SOX software in 2011.
Article from the Rapaport Magazine - October 2010. To subscribe click here.