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Industry
Holiday Sales Results
When holiday totals were tallied, jewelry sales were flat or very slightly up.
By Karolyn Schuster
The jewelry sector had been hoping for a much brighter holiday than it ended
up with. The low-price-point segment, with items priced at $500 or less, was
the only area that seemed to achieve respectable growth — and sales totals.
When the final numbers are posted with retailers’ fourth-quarter financial results
within the next few weeks, fine jewelry will be found to have underperformed, with fashion jewelry carving a niche as a fine jewelry alternative with appeal to a wide range
of consumers, not just the budget-conscious. The high end was hurting. High-income households that might have been expected to splurge in gift-giving in 2012 held back. Understandable, since it was precisely this group that had most at stake in the fiscal cliff negotiations, having been targeted for the biggest tax increases throughout the entire political discussion.
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“The macro uncertainty and concerns over higher taxes impacted the consumer psyche,” said David Wu, luxury analyst for Telsey Advisory Group, a New York City–based research and brokerage firm that focuses on the consumer market. “Certainly, the
consumer was more value-oriented, especially in the mid-tier market. With the exception
of engagement merchandise, the overall jewelry category underperformed, with growth in the low-single-digit range.”
Describing the luxury sector in general as “a bit choppy,” Wu nonetheless found pockets of strength, notably “watches and accessories offsetting softer trends in jewelry and apparel. The high end is still somewhat moderating. The luxury goods consumer gravitated in 2012 toward handbags, small leather goods and watches,” holding back from jewelry.
One reason could be because jewelry tends to be a higher-ticket item — and this was a price-point-focused year — but another reason, said Wu, is that “accessories manufacturers — companies like Michael Kors, Kate Spade and Tory Burch — have amped up their level of product innovation and the pace for introducing new designs.”
Everyone, from brick-and-mortar family jewelers to Tiffany & Co., was playing in a more competitive market in 2012. The competition came not only from online retailers
but also from department stores that expanded their fashion jewelry offerings and from jewelry chains that stepped up their product innovation and rolled out proprietary lines
at very affordable price points. Bridal continued to lead sales. Even when the economic landscape is rocky and consumer confidence is shaky, it seems that people still get engaged.
At the start of the holiday season, Wu told Rapaport Magazine that “Strong product innovation in jewelry and watches will drive the market this year. It’s all about innovation this holiday.” On that, he was spot on.
When preliminary holiday totals were released, the winners were companies, like
Signet, that had flooded the market with new products at a wide range of price points, especially at the lower end. Coming in lower than expected were those, like Tiffany,
who couldn’t compensate for the missing big-ticket buyers with returns from their
lower-priced, lower-margin silver products in a crowded marketplace.
The 2012 year-end did show growth from 2011 but it was very soft growth, much
softer than had been predicted at the beginning of the season. Still, the numbers would
have been even worse if last-minute shoppers hadn’t stopped their procrastinating and
come out in droves in the final days before Christmas. Even so, they didn’t spend enough to offset the long stall in gift-buying in the weeks leading up to December 25.
“In terms of the holiday sales cadence, the luxury and jewelry categories had something of a barbell performance,” said Wu, with a strong start and finish and softness in between. His “barbell” description is a pretty good assessment of overall retail sales as well.
There was a rousing start to the season on Black Friday, the day after Thanksgiving, and Cyber Monday, three days later, followed by week after week of sparse crowds, short lines, stocked shelves, silent registers and shuttered wallets. Then the surge of the final week rescued holiday totals from complete devastation.
The federal government may have averted the fiscal cliff but its procrastination did significant damage to holiday hopes for the country’s retailers. The fact that consumers didn’t know how much the budget crisis resolution was going to cost them until after Christmas had passed significantly undermined holiday spending.
ShopperTrak, the world’s largest counter of retail foot traffic, estimated that national retail sales rose 2.5 percent in November and December to about $248.8 billion from the same two months of 2011. It also estimated that foot traffic rose 2.5 percent. Black Friday, the shopping season’s official kick-off, retained its top spot as the busiest and best sales day. But the Chicago-based firm confirmed the importance and impact of last-minute shoppers when it also reported that three of the busiest foot traffic days and four of the highest sales days all occurred in late December.
“The final week of shopping before Christmas finished strong,” said ShopperTrak Founder Bill Martin. “Procrastinators finally headed to the stores” and helped several
days of Christmas week “secure places as the best-performing retail days of the year.”
The second through fifth top sales days were December 22, 23, 21 and 15, in that order.
The National Retail Federation (NRF) also reported that final totals came in below its projected 4.1 percent retail sales increase for the holiday. It noted that December retail
sales were up by 2.1 percent year over year and total retail sales for the holiday period
rose by 3 percent to $579.8 billion.
“I don’t think retailers could have done anything differently,” ShopperTrak’s Martin said, noting the holiday impact of tax concerns and the accompanying drop in consumer confidence in December.
MasterCard Advisors SpendingPulse pegged total retail sales growth, excluding automobiles and gasoline, at 2.8 percent in December year over year, down from growth
of 4.5 percent in November 2012. For the entire holiday season from October 28 to December 24, SpendingPulse said growth was only seven-tenths of 1 percent in six pivotal holiday categories that account for 30 percent to 35 percent of total retail sales on an annual basis. Those categories — luxury, jewelry, home furnishings, electronics, apparel and online — had grown by 2 percent in the 2011 holiday period over 2010.
“Throughout the year, we had been seeing a sustained, albeit gentle, strength to the monthly numbers,” said Kamalesh Rao, director of economic research for SpendingPulse. From the strong start to the holiday until the end of the year, Rao said, “we saw frequent swings between acceleration and deceleration.”
Michael McNamara, global solutions leader of MasterCard SpendingPulse, added that “While in most years, there is a similar soft patch in the first half of December, this year’s ‘soft patch’ was weaker than usual.” He noted that “Outside of Hurricane Sandy’s impact zone, the holiday season was definitely positive — and more in line with expectations.
But given that the Mid-Atlantic and Northeast regions account for about 24 percent of
total U.S. retail, if those regions go negative, they definitely have an impact on the
overall numbers.”
Although Zale Corporation’s 2012 holiday revenues were basically flat in 2012
— up by one-half of 1 percent from 2011 — Tom Haubenstricker, the company’s chief financial officer (CFO), boasted of “eight consecutive quarters of positive comparable-store sales” and said the company remains on track “to achieve positive net income in fiscal 2013.” In addition, comparable-store sales at Zale’s branded stores were up 3.1 percent
for holiday 2012.
Matt Appel, Zale chief administrative officer, attributed those gains to the introduction and expansion of its exclusive branded collections and its programs to facilitate credit purchases for customers. In-house credit programs are considered especially important
in closing higher-ticket engagement ring sales, and both Zale and Signet offer them.
Zale’s proprietary brands — including the Vera Wang Love line, Celebration Diamond Collections and Candy Colored Diamonds and Gemstones — “have been a catalyst for revenue growth and overall growth margins,” said Haubenstricker.
By any measure, Signet — and its Kay Jewelers and Jared the Galleria of Jewelry
brands — had a pretty splendid holiday season in the U.S. The company’s ad campaigns — “Every kiss begins with Kay” and “He went to Jared” were ubiquitous and their stores were generously stocked with a number of new branded lines that offered original, unique designs at a wide range of affordable price points.
That approach carried Signet to a 7.1 percent increase in sales over 2011 and revenues
of $1.24 billion. The numbers were even better when the drag from weaker sales in the U.K. were removed from the totals.
“Signet benefited from its strength in watches, especially its top six to seven watch brands, which registered high-single-digit and low-double-digit growth,” said Wu, who noted that there’s been a lot of design innovation in the watch category and watches increasingly are being positioned as a fashion accessory. He also noted the strength of Signet’s proprietary in-house colored diamond brands — the Shades of Wonder and Artistry Blue Diamonds — and in bridal, its Neil Lane line.
In a conference call following its holiday report, Signet Chief Executive Officer (CEO) Mike Barnes cited very, very strong bridal business, very strong colored diamond business, extremely strong watch business and a strong turnaround in Pandora. Barnes said Signet worked directly with the European-based Pandora team “to help us develop products more specific to the American market,” which resulted in more than 60 new Pandora beads that were “welcomed by the customers in our stores.” In evaluating the company’s holiday gains, Barnes also cited the extension of the Neil Lane line to include fashion jewelry
and the Family Collection addition to the Jane Seymour line.
Internet sales continued to be the darling of the retail industry. Online sales rose by
14 percent over 2011 to $42.3 billion and its share of total retail sales for the year passed the 10 percent mark for the first time, according to comScore, which tracks ecommerce business. In addition, the season saw 12 days with more than $1 billion in spending, compared to ten individual billion-dollar days in 2011.
Still, online was not immune to the subdued mood of the country. In releasing final numbers, comScore said, “A December swoon in consumer confidence gave way to
softer-than-expected buying during the critical shopping weeks in early to mid-December, from which growth rates never fully recovered.” Having forecast overall online growth of 16 percent, “we ended up with 14 percent, representing a shortfall of about $1 billion in sales,” said Andrew Lipsman, comScore’s vice president of industry analysis.
“The top online categories this year all revolved around smartphones and tablets,” Lipsman continued. “These devices really defined this year’s shopping season. Either consumers were buying smartphones and tablets or they were using them to shop in
such a way that it really affected the buying experience. The biggest overall trend was ‘showrooming,’ in which consumers brought these devices to the stores and used all
the new apps that are available to compare products and shop on prices. Then they
went home and completed the purchase online.”
Lipsman does feel jewelry retailers still have one advantage. “The more goods are commodity products or found widely across many retailers, the more likely the consumer
is to comparison shop on price. And it’s even more likely with big-ticket items because there is more money at stake,” he said. “The interesting thing about jewelry is that the
more unique the goods are, the less commoditized they are, the less likely the consumer is to comparison shop on price. As a brick-and-mortar jewelry retailer, I think once you have the customer in your store, you are in a better position to sell that consumer something
than you would be as a retailer in a lot of other product categories.”
In general, retailers were glad to close their books on 2012 and a holiday season that
had been expected to play out very differently. It just seemed that for every positive sign
of economic recovery — lower gas prices, stabilizing housing prices and a recovering
stock market — there were distractions and disturbances — Hurricane Sandy, the tragedy
at Newtown and a Congress that couldn’t get its act together until it was too late. The result was a discouraged consumer who didn’t feel much like shopping or splurging and who,
in the end, stuck with the buy-less, spend-less behavior that had gotten him through
the recession. Article from the Rapaport Magazine - February 2013. To subscribe click here.
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