IDEX Online Research: Birks & Mayors’ Recovery Continues in June Quarter

For the quarter ended June, 2006, Birks & Mayors, which operates 67 luxury jewelry stores in Canada (39 units) and the U.S. (28 units, all in Florida and Georgia), posted solid sales and a reduced loss. An extra week in the quarter and currency translation distorted reported revenues – up 22 percent - for the period.

After adjusting for these unusual factors, total sales on a comparable basis rose by 14.3 percent in the three-month period; same-store sales, which utilizes identical sales periods and constant currency, were up a very strong 10 percent. Canadian same-store sales rose by 10 percent, while U.S. same-store sales were up a solid 9 percent, well ahead of 7.5 percent posted for all specialty jewelers in the June quarter.

On a combined basis, Birks & Mayors generates about 63 percent of its sales from jewelry (roughly two-thirds of revenues), and the balance from watch sales. The U.S. division, Mayor’s, is particularly well known in the consumer market for its luxury watch brands. Retail sales represent about 96 percent of Birks & Mayors revenues, with 4 percent coming from corporate sales.

Highlights from the company’s June quarter results are as follows:

• Strong sales throughout the quarter – Sales during both the mid-quarter Mother’s Day period and the company’s proprietary June sales event were particularly strong. The sales mix of exclusive merchandise, which carries a higher-than-average margin, rose in the period.

• New stores planned – Mayor’s plans to open a new store in Florida during the fall; another new store is slated to open in the spring of 2007. A Mayor’s unit in Fort Lauderdale has been expanded to nearly 6,000 square feet from its former 3,682 square feet. In the fiscal year 2007-2008, at least two more Mayors are slated to open.

• Boutique test underway – The company is testing boutique units. Two will open this year – one each in Toronto and Vancouver – with the possibility of a third unit the following year. These units are designed especially for consumer tastes in major urban areas.

• Current sales trends positive – Since the end of the quarter (June 30, 2006), sales trends have remained robust for Birks & Mayors. However, management says that the pace of revenue growth is expected to slow later this year.

• Gross margins up – Birks & Mayors posted a gross margin in the quarter of 47.9 percent versus 47.7 percent last year due to a higher sales mix of proprietary goods which generate an inherently higher margin.

• Operating cost ratio down – The company’s operating cost ratio fell to 45.6 percent of sales from last year’s 46.1 percent due primarily to sales leverage. Other expenses – payroll, occupancy, and marketing – continued to rise at a moderate pace during the quarter.

• New POS system should boost sales – Birks & Mayors has implemented a new point-of-sale system in its Canadian stores. For example, the new system will provide images of each item in the store, something that was not possible under the former system. The POS system should help management adjust each store’s inventory to match the needs and wants of its individual customers; this should help boost sales.

• Holiday advertising slated – In Canada, Birks & Mayors’ holiday season advertising will promote designer goods as well as diamonds – such as diamond fashion jewelry and solitaires. In the U.S., advertising will also promote diamonds, diamond jewelry, and designer goods, as well as watches.