(IDEX Online) – Uncertain American consumers kept a tight rein on their jewelry spending in June. Total jewelry sales rose by just over 3 percent for the month, far below last year’s torrid pace of an 11 percent gain and well below the 5 percent year-to-date increase in jewelry expenditures. Jewelry demand in the U.S. market has been slowing since the beginning of the year.

 

Shoppers’ uncertainty – and the resulting spending restraint – is not likely to change any time soon. Those uncertainties, which won’t be resolved quickly, include the outcome of the presidential election in November, the faltering U.S. and global economy, languishing home prices, and a yo-yo stock market. While we have not officially changed our jewelry sales forecast for the year – in the range of a 4 percent gain for the U.S. market – it feels a little aggressive, though we are only half way through the year.

 

HIGHLIGHTS: June Jewelry Sales Muted

Consumer demand trends for jewelry in the American market are as follows:

 

·        Retail demand in June was muted, for both jewelry and all retail merchandise. Consumers kept their purse strings tight during the month.

 

·        Fine jewelry and watch sales were stronger than total retail sales (ex-automobiles), but were about even with total retail sales gains including the highly volatile automobile category.

 

·        Demand for fine jewelry outpaced demand for fine watches. Some of this is related to price inflation of components used in jewelry.

 

·        Specialty jewelers took market share from multi-line merchants who sell jewelry. Multi-line jewelers were promoting broader merchandise categories – apparel, seasonal hardlines and other goods – that could provide a major boost to sales. As a result, they did not focus on jewelry, a relatively modest category in their stores.

 

·        High-end jewelry and watches showed stronger demand than popular-priced merchandise.

 

·        Our jewelry and watch sales forecast remains unchanged, but bias is toward weaker trends.

 

DEMAND For Jewelry: Sales Slowing

Jewelry sales in the U.S. market have been on a downward slope since the end of 2011. Last year’s gain of 11 percent (2011 versus 2010 jewelry sales) was fueled largely by price inflation of diamonds and precious metals. This year, inflation has been much more moderate and generally stable. As a result, 2012’s jewelry sales gains in America are more in line with historic annual increases in the low-to-mid single digit range.

 

The graph below summarizes total jewelry sales gains by month for the past 15 months.

 

Source: Dept of Commerce

 

Detail of Jewelry Sales Trends

June 2012

·        Total jewelry sales: $5.0 billion, +3.1 percent

·        Specialty jewelers’ sales: $2.2 billion, +4.4 percent

o       Specialty jewelers’ sales were 44 percent of total U.S. jewelry sales in June

·        Other merchants’ jewelry sales: $2.8 billion, +2.1 percent

o       Other merchants’ market share was 56 percent of total U.S. jewelry sales in June

·        Total retail sales (all categories): +3.3 percent

o       Total retail sales, ex-autos: +1.7 percent

 

Second Calendar Quarter 2012

·        Total jewelry sales: +2.5 percent

·        Specialty jewelers’ sales: Flat

·        Other merchants’ jewelry sales: +4.5 percent

 

Six Months Year-to-Date 2012

·        Total jewelry sales: $30.8 billion, +5.3 percent

·        Specialty jewelers’ sales: $13.4 billion, +4.8 percent

·        Other merchants’ jewelry sales: $17.4 billion, +5.8 percent

·        Specialty jewelers captured 43 percent of the total jewelry sales in the U.S. for the first six months of 2012, while other merchants captured 57 percent of total jewelry sales.

 

The following table summarizes full data about retail and jewelry sales in June 2012.

 

Source: Dept of Commerce & LGI Network

 

What Sold In June: Jewelry Outpaced Watches

Jewelry demand was stronger than demand for fine watches in June, as the following data shows:

 

·        Fine jewelry sales rose by 3.2 percent to an estimated $4.355 billion in June. Fine jewelry represented just fewer than 87 percent of total sales of fine jewelry and watches in June; this was consistent with prior months in 2012 as well as consistent with historic trends.

·        Fine watch sales rose by 2.3 percent to an estimate $656 million in June. Fine watch sales were about 13% of total sales of fine jewelry and watches in June, which was consistent with prior months in 2012 as well as consistent with historic trends.

 

During most months in 2011, watch sales showed a greater sales gain than jewelry; this year, jewelry sales gains have been stronger than watches for five of the first six months.

 

Data from the LGI Network showed that demand for branded jewelry above $1,000 retail was particularly strong, with the strongest category at the top end – branded jewelry above $25,000 retail. LGI Network data for watches showed solid demand in the $300 to $800 range (retail), and from $1,000 to about $3,000 at retail prices. Demand for moderate priced watches and jewelry seems to be lagging. Thus, it is likely that jewelers’ unit sales were flattish or down modestly.

 

The graph below summarizes sales trends for jewelry (gold bars) and watches (blue bars). 

Source: Dept of Commerce

 

Who Sold Jewelry in June: Specialty Jewelers

The battle for market share has been bouncing back and forth like a ping-pong ball between specialty jewelers and other merchants – mostly multi-line discounters – who sell jewelry.

 

In June, specialty jewelers took market share from multi-line retailers, though it was not by a decisive margin. Specialty jewelers have been sharpening their promotions, while other merchants have been promoting broader categories such as apparel, summer goods and back-to-school merchandise. It is easier for merchants to boost sales by promoting broad categories rather than focusing on a narrow, less-important category like jewelry.

 

Here’s what the retail distribution channel data shows for jewelry and watches in June:

 

·        Specialty jewelers posted a 4.4 percent gain in sales. This was above the overall 3.1 percent gain for fine jewelry and watches, so this distribution channel took market share from others. This was about in line with May’s trends, but well ahead of the disastrous sales decline in April, when specialty jewelers’ sales fell by over 9 percent, while jewelry sales at other merchants rose by a robust 8 percent. We continue to believe that April figures are an anomaly, and we are awaiting revisions from the Commerce Department.

 

·        Jewelry sales at multi-line merchants such as Wal-Mart, JC Penney, Costco, and others rose by a more modest 2.1 percent in June.

 

The graph below summarizes recent monthly sales trends by major retail distribution channel in the U.S. market. The blue bars represent specialty jewelers’ sales trends (percent change year-over-year) versus jewelry sales trends at all other merchants (red bars).

 

Source: Dept of Commerce

 

Retail Market Share: Jewelry Gains Outpaced Total Retail Gains

During 2011, jewelry sales gains were much stronger than total retail sales gains (all categories of merchandise), indicating that jewelry captured significantly greater share of wallet during the year.

 

Beginning in March 2012, jewelry sales were drummed by total retail sales gains, as the jewelry category lost consumers’ share of wallet. This trend continued in April and May. Fortunately, it reversed in June. In part, this is a seasonal gain, related to jewelry gifts for high school and college graduates. However, it also shows that consumers are willing to purchase jewelry, despite their reluctance to buy other goods.

 

·        Total jewelry and sales rose by 3.1 percent in June, fueled mostly by jewelry demand.

 

·        Total retail sales, ex-auto, rose by a much more modest 1.7 percent in June. However, when automobile sales – often driven by price-based promotions rather than any underlying need for a new car – are added into the equation, total U.S. retail sales rose by 3.3 percent in June, just ahead of jewelry sales gains.

 

The following graph summarizes retail sales trends (green bars) versus jewelry sales trends (red bars).

Source: Dept of Commerce

 

Corroborating Jewelry & Watch Sales Data

Watches – Watch sales data from the LGI Network confirms the same softening trend that the U.S. Department of Commerce is reporting, as the following graph illustrates:

 

Source: Dept of Commerce & LGI

 

Jewelry – LGI data tracks sales of almost a dozen well-known higher-end brands of jewelry. Hence, it will not necessarily correlate with total jewelry sales. While there have been some sharp swings in demand among the jewelry brands that LGI tracks, the overall trends reflect some weakening in jewelry demand similar to the data reported by the Commerce Department, as the graph below illustrates: 

Source: Dept of Commerce & LGI

 

The branded jewelry sales figures are based on the performance of LGI Network's Branded Jewelry Tracker service which currently reports on eleven leading jewelry brands including David Yurman, Hearts On Fire, John Hardy, Kwiat, Marco Bicego, Ippolita Mikimoto, Precision Set, Roberto Coin, Scott Kay and Tacori. The branded jewelry sales trends are derived solely on the per-storefront productivity of independent specialty jewelers only.

 

Specialty Jewelers – InStore magazine has a panel of specialty jewelers – called the Brain Squad – which report monthly sales trends. While the sample is large enough to be reasonably accurate, we suspect that jewelers with good news are more likely to report their numbers than jewelers whose performance is lagging. Still, the Brain Squad’s trends reflect a modest weakening in sales trends, though not as great as the Commerce Department data, as the following graph illustrates:

 

Source: InStore

 

Outlook: Moderate Gains

Jewelry sales in the U.S. market correlate closely to economic growth. After a solid recovery in 2011 – culminating with economic growth of 4.1 percent in the fourth quarter of 2011 – America’s economy posted a weak 2.0 percent gain in the first quarter and an even weaker 1.5 percent gain in the second quarter. Hence, it should be no surprise that jewelry sales have weakened so far this year.

 

A reminder to those who follow IDEX Online Research regularly: U.S. Gross Domestic Product (GDP) trends show the closest correlation to jewelry sales, and no other factor – unemployment, interest rates, savings rate, stock market performance – shows a closer correlation. The oft-quoted consumer confidence indices show almost no correlation – either direct or inverse – to jewelry sales trends, and for this reason we do not report it, nor is it a factor in our forecast equations.