IDEX Online Research: U.S. Jewelry Industry Sales & Profits Set Records in Q1
June 26, 11(IDEX Online) – Jewelry sales hit record levels in the first quarter of 2011, for both specialty jewelers and other merchants who sell jewelry in the U.S. market.
Most jewelers also reported improved profits in the first quarter. We heard from a few jewelers in our sample that they finally posted a profit in the first quarter, after three consecutive years of losses in this first quarterly period.
Jewelry & Watch Sales Hit Record Levels
Total jewelry and watch sales in the U.S. were about $15.1 billion in the first fiscal quarter of February-April, up from about $13.7 billion in the same fiscal period last year. For the first calendar quarter, total jewelry and watch sales were $14.2 billion, up from last year’s $13.0 billion in the first three months of the year.
Specialty jewelers also posted strong gains in the first quarter. For the calendar first quarter, specialty jewelers’ sales reached $5.9 billion, up from the prior year’s $5.5 billion. For the first fiscal quarter (February-April) specialty jewelers’ sales were $6.5 billion, up sharply from last year’s $5.8 billion.
The table below summarizes sales trends for the first quarter (fiscal and calendar) of 2011.
Source: US Department of Commerce |
Public Jewelers Post Record Financials
Almost all of the publicly held companies in the jewelry industry posted record financial results. On a year-over-year basis, every company generated stronger sales. In terms of a record first quarter, Tiffany, Blue Nile, Movado (stores), Harry Winston, and Sterling / Signet generated greater sales than in any prior first quarter. Only two companies lagged: Zale and Movado (wholesale).
The table below summarizes sales trends in detail for the publicly held jewelers who have reported results as of mid-June.
Source: Company Reports |
Profit Trends Positive
All of the public companies reported either a smaller loss or greater profits in the first quarter of 2011, as the table below illustrates. Zale was the only company to report a loss in the quarter, but it was smaller than in the prior year.
Source: Company Reports |
Two Key Trends in the Quarter
There were two key merchandise trends which characterized jewelers’ quarterly sales.
· Fashion Rules – Jewelry shoppers want both fashion and “something different.” Demand for commodity jewelry remained relatively weak, while demand for fashion jewelry was very strong. Consumers are buying designer goods and brands as a way of purchasing differentiated merchandise. Zale reported that several jewelry categories began to show positive sales comparisons in the quarter, including diamond fashion, color, metals and watches. Further, Movado reported that its newly introduced Movado Bold watch, aimed at younger, more fashion-oriented shoppers, has reinvigorated the Movado brand with strong sales gains.
· Lower Price Points Are Stronger – Whether it is at uber-luxury jeweler Harry Winston or at a mass-market jeweler like Gordons, consumers are shopping for lower price points. Harry Winston is dropping its opening price points for watches from $50,000 to $20,000 for men (and even lower for women). Movado reports that its lower price point watches are outselling higher price points across virtually all of its lines. For specialty jewelers, Pandora goods are leaping off the shelves due in part to lower retail price points.
Other Major First Quarter Trends
· Jewelry sales gains accelerated throughout the quarter. Sales showed solid gains in January, with some mixed results in February and March, followed by a very strong April. The table below summarizes sales gains for the total jewelry and watch category as well as for specialty jewelers.
Source: US Department of Commerce |
· The average value of a jewelry transaction was up in the mid-to-high single digit percentage range during the first quarter.
· Unfortunately, the average transaction value gain was driven mostly by inflation – higher gold and diamond prices. Unit sales volume is nearly flat, by our estimates.
· Most jewelers reported that the number of transactions rose in the quarter. In general, malls are reporting increased customer traffic. Further, jewelers’ sales training is paying off: the conversion rate – browsers to buyers – is up.
· The largest percentage gain in sales came at the high end. This is partially due to easy comparisons against last year, when the high-end was slower to establish a recovery.
· Demand for bridal jewelry remained strong.
· Gold buying – and some diamond buying – has continued to keep many jewelers afloat, especially during the recent recession. This trend continued into the first quarter of 2011, though perhaps at a slower pace.
· Sales of charms and beads were very strong.
· Proprietary jewelry sales were very strong.
· Designer jewelry sold well, though some jewelers report mixed results with designer goods. The designer’s name must be recognizable to consumers.
· Sales per store continued to rise. Only Zale failed to report record per-store sales levels.
· Jewelers reported mixed results with credit sales. Credit sales edged up for Sterling Jewelers (Kay, Jared, regionals), but were slightly off for Zale. In general, approval rates are up modestly. Credit is available, but it is not plentiful.
· Jewelers who sell warranty and insurance plans for jewelry say that this business has been both strong and profitable.
· New product introductions generally have been successful. Consumers want “something new.”
· Watch sales improved significantly, after being lackluster early in the recovery period.
Outlook Remains Relatively Bright
Jewelers remain cautiously optimistic.
· Tiffany continues to beat its Wall Street guidance. Movado says its revenues are expected to rise by 11-13% this year, despite a sales gain of 23% in the first quarter. We’d characterize Signet management as “cautiously optimistic.”
· New store openings are increasing, but at a slower pace than we had originally expected. Jewelers are being choosy about their selection of new store locations.
· Several jewelers mentioned that they plan to increase the introduction of proprietary products this year.
· Almost all jewelers mentioned that they plan to raise retail prices in the second half of the year, driven mostly by higher commodity costs.