U.S. specialty jewelers’ sales surged by more than 10 percent in March, compared to the same month in 2005. While comparisons were easy against last year’s performance – +0.7 percent – consumers showed that they have not cut their spending due to high gasoline prices.

 

Further, March’s strong performance continues the trend of strengthening jewelry sales each month so far in 2006. In January, jewelry sales were up 6.8 percent over the same month a year ago. In February, the Valentine’s selling period fueled a sharp 8.5 percent jump in jewelry sales. In March, jewelry sales surged by 10.4 percent over March 2005.

 

There is an old adage: “Americans are born to spend.” That adage was certainly true for jewelry in March. The graph below summarizes specialty jewelry demand versus demand for all retail goods.

 

Source: Dept of Commerce

 

Mall jewelers’ sales have shown a trend slightly different from those reported by all jewelers, including independent specialty jewelers who are typically located in off-mall locations. In January, mall jewelers posted a solid 9.2 percent gain; in February, they generated a 7.6 percent gain. While this performance is very strong, it represented weakness from January’s strong demand. March mall jewelry sales reports have been delayed temporarily until the end of May. The graph below summarizes jewelry sales demand trends of mall jewelers versus specialty jewelers.

 

 

Source: Dept of Commerce & ICSC

 

In a reversal of the prior year’s trends, jewelry demand has outpaced the demand for other luxury goods for each month of 2006. In part, this disparity can be explained by easy comparisons to last year’s dismal jewelry numbers. In part, however, it is clear that American consumers have returned to jewelry stores and are buying goods. The graph below summarizes luxury goods retailers’ sales trends versus jewelry sales trends in the U.S.

 

Source: Dept of Commerce & ICSC

 

Factors Affecting Consumer Demand

As we mentioned last month, retail sales volatility is not uncommon at this time of year. Weather can play a major role in consumers’ shopping habits. Other than Valentine’s Day, there are no major shopping events until Easter rolls around.

 

The key driver of consumer demand in March appears to have been the healthy labor market. Unemployment is below 5 percent, a level considered full employment by some economists. Further, wage and salary gains have boosted both the amount of money consumers have to spend as well as their confidence in the future. Record high consumer wealth levels have brought smiles to consumers’ faces.

 

However, sales growth could be constrained by several factors. High gasoline prices – expected to rise even more as the summer driving season arrives in June – are the major potential damper on consumer spending trends. So far, though, demand for jewelry has remained robust, except at the very low end. For example, Piercing Pagoda reported that it is feeling some effect on demand for its goods by teenagers on limited budgets. Further, consumer debt burdens are high, and will be more of a drag as interest rates rise.

 

The bottom line: we continue to forecast a healthy, but not stellar growth rate for consumer spending in 2006.

 

IDEX Online Research’s Proprietary Jewelry Sales Forecast

IDEX Online Research recently introduced its proprietary jewelry sales forecast model for the U.S. market. This mathematically driven projection couples historical performance with economic data to produce a sales forecast for U.S. jewelry demand.

 
After weighing negative factors – gasoline prices, debt burden, rising interest rates – with the positive factors – strong wage gains, robust economic growth, and record consumer wealth levels – our latest forecast suggests that U.S. jewelry sales will rise by nearly 6 percent this year. Intuitively, this seems like a high level, so we would urge jewelers to use some caution with this forecast. We are more comfortable with a +5 percent forecast, but we don’t want to give the impression that we are second-guessing the mathematical model. The graph below summarizes our current forecast for U.S. jewelry sales in 2006. Prior years’ comparisons are also shown.

 

Source: IDEX Online Research