(IDEX Online) - July jewelry sales were strong, and could set the pace for a strong third quarter. If these trends remain in place, it also bodes well for a solid fourth quarter. Jewelers would welcome these trends, since the fourth quarter includes the all-important holiday selling season which accounts for up to 30 percent of a retail jeweler’s annual sales.

 

Here’s the scoreboard for July U.S. retail and jewelry sales:

 

Retail Category July 2010 Vs July 2009 Total Retail Sales – All Categories +5.4% Total Retail Sales – Ex-Auto & Food +5.1% Total Jewelry & Watch Sales +8.2% Total Jewelry Sales +8.1% Total Watch Sales +8.3% Total Specialty Jewelers’ Sales +7.3% Total “Other” Merchants’ Jewelry Sales* +9.0% Source: U.S. Department of Commerce *Jewelry sales at all merchants not classified as “specialty jewelers.” Includes Wal-Mart, J.C. Penney, Kohl’s, Costco and others.

Highlights of July jewelry sales in the U.S. market include the following:

Total Jewelry Sales Strengthen From Prior Months

 

·        Total U.S. jewelry and watch sales rose by 8.2 percent in July, to an estimated $4.1 billion. This is about in line with the year-to-date average gain of 8.3 percent.

These figures include all jewelry and watches sold by any merchant – specialty jewelers, multi-line retailers, online sellers and any other retail channel. July’s jewelry and watch sales of $4.1 billion were up from March and April sales levels of about $4.0 billion each, but below $5.2 billion in May and $4.3 billion in June. The incremental sales in May – roughly $1.2 billion – reflect demand for Mother’s Day jewelry.

The table below compares U.S. monthly jewelry sales in billions of U.S. dollars for the first seven months of 2010 versus the same period in 2009. Due to rounding, the numbers may not foot and cross exactly.

 

Jan Feb Mar Apr May Jun July YTD 2009 $3.0 $4.6 $3.5 $3.8 $4.8 $4.1 $3.8 $27.6 2010 $3.3 $4.9 $4.0 $4.0 $5.2 $4.3 $4.1 $29.9 % Chg 9.8% 7.1% 12.3% 6.3% 8.1% 6.3% 8.2% 8.3%

MasterCard reported that jewelry sales in July were down 1.2 percent; further, they asserted that “high-end luxury” jewelry sales were down 13 percent. As we have said in the past, we believe their sample is not truly representative because it includes only sales made on their credit card.

 

·        Watch sales have generally been stronger than jewelry sales in 2010, but this is largely due to easy comparisons against 2009 watch sales, which were dismal. This trend held during July: watch sales were up 8.3 percent, according to the Department of Commerce, a modest gain over jewelry’s sales gain of 8.1 percent - for a blended rate of an 8.2 percent sales gain.

Sales figures from the LGI Network indicated that watch sales were up about 10 percent in June, with unit sales up 13 percent. LGI’s data correlates closely with the Department of Commerce figures.

The graph below compares watch sales (blue bars) to jewelry sales (red bars).

 

Source: US Dept of Commercce

·        The current annual run-rate for total jewelry sales in 2010 is $63.3 billion, based on Commerce Department figures. This is down from prior months’ projections as high as $64 billion, but it is well above 2007’s record jewelry sales of $62.0 billion (revised), and it is ahead of our expectations.

 

Specialty Jewelers Post Strong July Sales

Specialty jewelers’ sales represent just under half of all jewelry sales in the U.S. on an annual basis. In July, they were $2.1 billion, about 51 percent of total industry sales of $4.1 billion.

 

·        Specialty jewelers posted a solid 7.3 percent gain in sales in July 2010 versus the same month a year ago. This was modestly above the year-to-date sales gain of 6.8 percent for U.S. specialty jewelers.

The graph below summarizes specialty jewelers’ monthly sales gains for the past 15 months. There is significant variation in the monthly sales gains since the recovery began in September 2009, as the graph illustrates. Typically, there is significant monthly volatility in jewelry sales during an economic recovery.

Source: US Dept of Commercce

 

·        Specialty jewelers’ sales rose to about $2.1 billion in July 2010, somewhat above July 2009’s $1.9 billion. This was about in line with sales levels during months without specific sales events such as Valentine’s and Mother’s Day.

·        Looking ahead, monthly sales comparisons remain relatively easy for specialty jewelers through the end of summer. Beginning in September – the first month of the recovery cycle which began a year ago – monthly sales comparisons become more difficult. Thus, we expect modest sales gains for specialty jewelers later this year. However, we caution that sales could be choppy until the U.S. economy shows solid signs of a sustained recovery.

Jewelry Compared to Other Retail Sectors

In most economic cycles, jewelry sales dip further than total retail sales, and rise faster during the recovery period. This has been the trend in 2010. Unfortunately, however, specialty jewelers have not participated in this recovery as much as other retailers who sell jewelry. Historically, specialty jewelers lose market share in a recession, and never regain it; this has occurred in the recession of 2008 and 2009.

 

·        Jewelry sales have shown greater gains than total retail sales every month this year, with the exception of April. This indicates that jewelry is gaining market share – share of wallet – during the recovery period. As noted, this trend often occurs in a recovery period. The graph below illustrates jewelry sales trends (red bars) versus total retail sales trends (green bars).

Source: US Dept of Commercce

·        Specialty jewelers continued to lose market share in July. In 2009, specialty jewelers ended the year with a 48.0 percent market share of all jewelry sold, down 80 basis points from the prior year’s 48.8 percent (all data has been revised to reflect new annual and monthly figures released in July 2010 by the government). In January and February of 2010, specialty jewelers lost market share, but in March and April, the trend reversed. However, for the past three months, specialty jewelers’ sales gains were notably below the industry average, indicating that they have lost market share overall.

The graph below summarizes sales gains by specialty jewelers versus other merchants who sell jewelry. Specialty jewelers’ sales trends are shown by the blue bars, while other merchants’ jewelry sales are shown by the red bars.

Source: US Dept of Commercce

Outlook: Brighter for Jewelry

The U.S. jewelry industry is poised to post record sales this year. Based on current trends through the first seven months of 2010, IDEX Online Research is forecasting that jewelry sales in the U.S. market could reach $63.0 billion this year, up 7 percent from last year’s $58.8 billion, and about 2 percent ahead of 2007’s record level of $62.0 billion.

 

IDEX Online Research is forecasting a record holiday selling period – November-December 2010 – both at the retail level and at the supplier level. Retail jewelry sales could reach $20.6 billion this year, or about $600 million more than the prior record holiday period in 2007, just before the recession of 2008-2009 began.

 

While the U.S. economic recovery remains weak, two key factors are expected to improved jewelry sales throughout the distribution pipeline:

 

·        Consumer Demand – The three segments that were largely responsible for dragging the economy into the recession – job losses, stock market declines and housing market woes – appear to have stabilized and may be in a recovery mode. While the stock market remains volatile, it has shown an amazing recovery since its bottom in the first quarter of 2009. Further, real estate values have begun to recover in some markets. Finally, joblessness has not gotten worse, and appears to be improving in selected metros.

 

·        Pipeline Restocking – Suppliers throughout the distribution chain report that orders have picked up, mostly due to re-stocking at all levels of the pipeline. Retailers have finally begun to realize that they cannot make sales without inventory in their stores. As they have placed orders, others in the distribution chain have begun to add to their inventories.

 

The big question seems to be this: will the U.S. economy slip into a double-dip recession? The newest data suggests that neither the U.S. nor the global economy will experience a double-dip recession; rather, the recovery will remain anemic.

 

IDEX Online Research knows this much about American consumers: 1) they are tired of the recession, and they are ready to start spending again; and, 2) there is an old American adage that just might be the salve for Christmas 2010 – “when the going gets tough, the tough go shopping.”