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Rapaport TradeWire December 28, 2012

Dec 27, 2012 6:00 PM   By Rapaport
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Rapaport Weekly Market Comment Dec. 28, 2012

Caution: Automatic Jan. 1 U.S. tax hikes may significantly reduce diamond ‎demand. News: U.S. holiday sales disappoint as consumer confidence slides on ‎stalled budget talks. Final effort to beat fiscal cliff deadline expected but inevitable tax hike will ‎reduce 2013 jewelry demand. MasterCard Advisors SpendingPulse reports Nov./Dec.  ‎retail sales +0.7% vs. +2% in 2011. comScore says online sales +16%. Diamond trading ‎quiet as U.S. and Belgian markets close for Christmas break and Indian manufacturing ‎cautiously resumes after Diwali. Israel and other markets focusing on Far East Chinese ‎New Year demand.

RapNet Data: Dec. 27
Diamonds   974,972
Value $6,178,135,631
Carats   1,054,527
Average Discount -27.43%

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The Rapaport Group
wishes you and yours
a happy, peaceful,
healthy and prosperous
New Year.

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  Christmas shopping season experienced only marginal growth when compared to the 2011 season. The Northeast, Mid-Atlantic and North Central regions of the country all lagged the national average growth, while the southern and western regions of the country experienced more positive holiday shopping seasons. You really did have two kinds of results, depending on the region -- one had a relatively negative season, while the other was more in line with the lower-end of expectations. And between the two, even with all the negative headwinds, the country managed to gain slightly over last year.

Michael McNamara | MasterCard Advisors SpendingPulse

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants, and entry level positions for our offices in New York, Antwerp, Mumbai, Dubai, and Shanghai. View jobs now.

Retail Sales Growth Slows to a Crawl

A SpendingPulse report by MasterCard Advisors found that, from October 30 to December 24, U.S. consumers increased their spending by 0.7% year on year for categories such as jewelry, apparel, electronics, online, luxury and furnishings. The measure excluded autos, food and fuel. SpendingPulse noted that online sales for those same categories grew only 8.4% year on year with the strongest products being specialty apparel and electronics. 

The Christmas-season, as measured from about November 1 through January 1, initially experienced steep sales declines in the northeastern U.S. due to storm damage, but then sales recovered when promotional activity stimulated growth, the group concluded.  However, across the nation, growth subsided in the first half of December with several areas returning to negative growth year on year. Finally, sales improved again for the final two weeks before Christmas.

Meanwhile, comScore observed that Christmas-season retail sales from November 1 through December 22 jumped 16 percent year on year to $38.7 billion and that rate of growth was in line with expectations.


Theo Fennell Narrows Loss

Theo Fennell reported that revenue fell 8% year on year to $7.9 million for the six months that ended on September 30. The cost of sales was nearly 7% lower at $3.7 million and the luxury jeweler lowered its loss to $987,000 from $2.3 million one year earlier. Theo Fennell is in ongoing discussions with EME Capital about a potential takeover and it will inform the market when there are further developments to report.

NRF Warns of Fiscal Cliff Impact

The National Retail Federation (NRF) estimated that U.S. retail sales in 2013 would fall flat for the year, following a contraction in the first half, if middle-class tax increases go into effect as a result of inaction on the so-called fiscal cliff. However, if Congress and the White House reach a deal to avoid automatic tax increases on December 31,  the NRF's chief economist, Jack Kleinhenz, estimated that retail sales would increase between 2% and 2.5% year on year for 2013.

Sterling, Zale Trade Barbs in Court

Sterling Jewelers charged that Zale violates the Lanham Act with its Celebration Fire tagline, the ''most brilliant diamond'' in the world, but Zale argued that Sterling makes similar claims with its own branded diamonds. Expert witnesses for plaintiff Sterling argued that Zale could only make a brilliant claim if each Celebration Fire diamond was indeed the most brilliant. Defendant Zale argued that Sterling's witnesses collaborated in the case simply for competitive reasons. Zale has requested a trial by jury.

Read the latest court summary briefs
Sterling Says Zale Misinterprets an Advertiser's Legal Burden

Zale Says Sterling Misleads With Its Own Diamond Claims

Sterling Says Consumer Expectations Exceed Zale's Claim

U.S. Consumer Confidence Flat

The Conference Board's Consumer Confidence Index was basically flat year on year at 65.1 points (1985=100) for December 2012, but the group noted a sharp drop from November's reading of 71.5 points. Nonetheless, the Present Situation Index rose 34% year on year to 62.8 points. The Expectations Index, however, fell 13% to 66.5 points. The group observed that the pending fiscal cliff negotiations worried consumers most.

JJS Attracts Strong Attendance

The tenth edition of the Jaipur Jewellery Show (JJS) in India, also known as the December Show, experienced higher traffic than one year ago and exhibitors reported good inquiries from buyers. Jewelry demand was relatively better than diamonds, however. Organizers estimated more than 30,000 visitors participated in the show and some 290 exhibitors were present to serve.

L'Azurde Opens Flagship Store

Saudi Arabia-based jeweler L’Azurde expects to invest $26.7 million in expanding it diamond store network, tripling the number of locations to 30 in the next three years. L’Azurde reported an annual growth rate of more than 30% this past year. The brand opened a new flagship store in Riyadh on Olaya Street this past week.

Groupon Acquires Channel Solution

Groupon  acquired CommerceInterface, a provider of web-based channel management technology that serves manufacturers, distributors and retailers to manage online sales. Terms of the deal were not disclosed.  Groupon said it has been using CommerceInterface technology since April 2012 to streamline its own operations and automate interactions with vendors. As part of this deal, CommerceInterface will no longer serve other retail channels and current customers will have the option to transition to other vendors over the next six months with migration support from the company.

YES Bank Adopts Commodity XL Solution

YES Bank licensed Triple Point Technology's  Commodity XL for Precious Metals software to manage its gold and silver bullion wholesale and retail distribution operations in India. YES Bank  serves corporate and retail customers at more than 380 branches in 275 cities. The software provides an enterprise solution to seamlessly manage all aspects of the precious metals supply chain at YES Bank, while supporting regulatory compliance, according to the companies.  Commodity XL provides a real-time, enterprise-wide view of exposure and automatically generating compliance documentation for national or international trade.

Runci Retires From JA

Matthew A. Runci, the president of Jewelers of America (JA) for more than 17 years, will retire on December 31. David J. Bonaparte, formerly the vice president of JCK Brands for Reed Exhibitions,  will take the helm of the national jewelry trade association effective January 1. The two men have worked together since October to ensure a smooth transition of leadership. Bonaparte will focus on continuing JA's public policy work, in addition to enhancing its membership, both in terms of size and benefits.

ALROSA Acquisition Expands Production

ALROSA acquired a 51% stake in alluvial diamond miner  Nizhne-Lenskoye for $119 million and it will provide additional production of two million carats a year. Nizhne-Lenskoye mines alluvial diamonds near operations overseen by ALROSA's subsidiary Almazy Anabara. The company has estimated diamond reserves of 26.4 million carats and its existing and expected mineral resources are sufficient to maintain diamond mining for 17 years.

ALROSA also began strip mining operations at its Botuobinskaya diamond pipe, the first phase in developing the deposit to prepare it for mining minerals. Stripping will continue for three years, with commercial diamond mining at Botuobinskaya expected to begin in the fourth quarter of 2015. The diamond pipe will be worked as an open pit, while its ore will be processed at the existing facilities of Nyurba GOK, a mining and concentrating mill. The open-pit mine will  produce about 1.5 million carats annually after Botuobinskaya reaches its design capacity of 300,000 tonnes of ore per year. Botuobinskaya has an estimated diamond reserve of more than 70 million carats given its diamond grade is 5.13 carats per tonne.

Diamond Industry Stock Report

U.S. retail shares took a bath as investors noted weaker-than-expected preliminary Christmas sales. Birks -9%, Blue Nile -5%, Signet -4%, Zale -8%. European shares were lower, but not much worse than flat. Indian shares were mixed, Classic -10% but C.Mahendra +10%, Goenka -4% but Goldiam +3%. Mining shares were slightly higher except for Rockwell -8%, Harry Winston -5%, Stellar -7% and Stornoway -1%. Read the extended industry stock report for this past week.
  Dec. 27 Dec. 20 Chng.  
$1 = Euro 0.755 0.755 0.000  
$1 = Rupee 54.95 54.86 0.1  
$1 = Israel Shekel 3.73 3.74 -0.01  
$1 = Rand 8.49 8.48 0.01  
$1 = Canadian Dollar 0.99 0.99 0.00  
Precious Metals        
Gold $1,664.00 $1,648.50 $15.50  
Platinum $1,532.00 $1,546.00 -$14.00  
Stock Indexes       Chng.
BSE 19,323.80 19,453.92 -130.12 -0.7%
Dow Jones 13,096.31 13,311.72 -215.41 -1.6%
FTSE 5,945.30 5,958.34 -13.04 -0.2%
Hang Seng 22,619.78 22,659.78 -40.00 -0.2%
S&P 500 1,418.09 1,443.69 -25.60 -1.8%
Yahoo! Jewelry 1,101.57 1,116.13 -14.56 -1.3%

Polished and Rough Trading Activity

Local polished trading is limited, there is some demand for smaller sizes, better demand for SI and lower but shortages remain. Read the full report.


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