LKI Q1 Profits fall 64% Despite Strong Sales
October 13, 05
DTC Sightholder Lazare Kaplan International (LKI) reported a drastic fall in first quarter profits on Wednesday. Profits fell 64 percent to $908,000 from $2.5 million a year earlier. This happens while the company enjoyed a 77 percent leap in net sales.
The publicly traded diamond dealer and manufacturer tagged the drop on gross margin declines resulting from a shift in product mix.
Both polished and rough diamonds sales increased during the quarter, fetching $138.9 million, up from $60.6 million.
The decline in gross margin ($9 million, or 6.5 percent, compared to $9.9 million, or 12.6 percent) reflects a shift in sales mix with a higher percentage of first quarter 2006 revenues derived from rough diamond trading compared to the same period last year, LKI said.
In addition, a higher percentage of polished sales were derived from fine cut commercial diamonds, which typically carry a lower gross margin than branded diamonds, in the three months ended August 31, 2005 than in the comparable prior year period.
In response to the news, LKI's shares fell 3 cents to $9.59 on the American Stock Exchange.