Charles & Colvard Posts Q1 Loss As it Invests in Business Initiatives

(IDEX Online News) - Charles & Colvard’s first quarter net sales increased 4% to $3 million, the moissanite maker reported Thursday. The increased income did not prevent the company from falling into the red, posting a net loss of $236,000.

Loose moissanite sales were relatively flat in the first quarter ended March 31, a historically slow quarter. Finished jewelry sales increased 130% to $410,000.

The company said that the loss was primarily a result of higher manufacturing overhead and operating expenses incurred during the quarter to invest in new business initiatives to support future revenue streams. Operating expenses increased $227,000, or 14%, when compared with the same period in 2010.

"Our first quarter results reflect our focus upon establishing customer relationships that can increase future sales of finished jewelry, combined with the fact that January and February are seasonally the slowest months of the year for wholesale jewelry sales," commented CEO Randy N. McCullough.

McCullough said that the company made a strategic decision to increase jewelry manufacturing activities and finished jewelry sales as a percentage of the Company's total revenues so it could benefit from the added income.

“While gross profit margins on finished jewelry, due to labor and overhead, are generally lower than margins on loose gemstones, we believe the success of this new business initiative will increase the total revenue and gross profit dollars that Charles & Colvard generates from the ultimate sale of moissanite jewelry to the consumer,” McCullough said.

The company was also concerned by the limited control it has over the final moissanite-set jewelry items and how it was positioned. “We believe our entry into the finished jewelry business positions us to expand consumer awareness of moissanite," he added.