Chain jewelers across America took market share from independent jewelers in the third quarter of 2005.  Almost every chain jeweler in our sample generated sales gains well above the very modest 2.4 percent average revenue increase posted by specialty jewelers.  Because sales results of chain jewelers are also included in the 2.4 percent industry-wide gain, it is safe to say that independent jewelers, as a group, likely posted a sales gain of 1 percent or less. 

 

Third quarter results also confirmed that the performance of mall-based jewelers is improving. After languishing for the past couple of years, mall jewelers’ sales gains have begun to show some pep.  While mall traffic remains weak, jewelers have either been able to raise the average ticket or increase the conversion rate (browsers to buyers). 

 

The following graph summarizes total sales gains for major publicly held jewelry chains in the U.S.

 

Third Quarter 2005 Sales Trends Who Gained or Lost Market Share? Total Revenue Percent Change Year-over-Year Source:  Company reports

 

By month, sales in the third quarter were mixed.  For mass market jewelers, sales were strongest in August.  September sales were affected by fall-out from two devastating hurricanes along the Gulf Coast of the U.S.  However, luxury demand was not affected by those hurricanes.  For luxury jeweler Tiffany, sales were strongest in both September and October, as the table below illustrates. 

 

Jewelry Sales Trends by Month    Third Quarter - 2005       Independent Jewelers   Mall Jewelers    Luxury Tiffany*    July  (2%)  +4%  +4%   August  +8%  +7%  +5%   September   +1%  +5%  +8%   October  N/A  N/A  +8% * Tiffany = Same-store sales

 

Same-store sales, considered one of the key measures of real revenue productivity for retailers, also showed solid gains for many jewelers in the third quarter, as the graph below illustrates.

 

U.S. Retail Jewelers Third Quarter 2005 - Same-Store Sales Percent Change Year-over-Year Source:  Company reports

 

Jewelers reported strong demand for certain categories of jewelry, including the following:

• Large diamonds
• Three-stone jewelry
• Right-hand rings
• Colored stone jewelry
• Yellow gold jewelry
• Big bold jewelry
• Designer collections

Jewelers reported weakness in the following categories:

• Platinum jewelry (weak in mass market, but stronger among luxury jewelers)
• Tableware
• Gifts

In prior quarters, demand for watches has been strong.  However, Tiffany reported that watch sales in the third quarter were nearly flat.  In contrast, Jared cited watches as one of the strongest categories for its stores. 

 

 

Sales Trends of Major Publicly Held Retailers

High-End Jewelers

Mayor’s Jewelers – Total sales +17.3 percent; same-store sales reported +20.3 percent, but adjusted to 14.4 percent.  Several factors helped drive Mayor’s sales, including the following:

• The average ticket rose, due in part to higher retail prices.
• Comparisons were easy against 2004 when three hurricanes closed 24 of Mayor’s 28 units for varying time periods. 
• After eliminating the impact of last year’s hurricanes, Mayor’s third quarter 2005 same-store sales would have risen by a very strong 14.4 percent. 

Movado – Movado Boutiques total sales +33.1 percent; same-store sales +10.6 percent.  Total sales in the high-end Movado Boutiques were fueled by a large number of new stores as well as strong same-store sales.

• Product categories which were strong include:
  • Yellow gold jewelry
  • Fashion jewelry
  • Collections
  • Watches
• In addition to jewelry and watches, the company has added tabletop and gift items to its store sales mix. 
• Movado Outlet stores posted a sales gain of 16.4 percent. 
• Movado reported that among its various watch brands, both the high-end and entry-level watches sold well.  However, demand is softer for mid-level watches. 

Tiffany & Co. – Luxury jewelry stores worldwide – Total U.S. sales +9 percent; U.S. same-store sales +7 percent.  Sales were in line with plan.

• By month, Tiffany’s sales were as follows:
  • August +5 percent
  • September +8 percent
  • October +8 percent
• Geographically, Tiffany’s third quarter sales were as follows:
• New York 5th Avenue Flagship store +12 percent, driven entirely by tourist sales
  • New York region +8 percent
  • All U.S. branches (ex-New York Flagship) +6 percent
  • California region +9 percent
  • Hawaii was soft due to lack of tourists
  • Especially strong store performance occurred in Charlotte, Chicago, Dallas, San Jose, and Bellevue.
• Store traffic and transactions were flat, but jewelry unit volume was up.
• Greater sales of higher-priced diamonds helped the average ticket.
  • Diamonds priced $3,000 to $20,000 were very strong
  • Diamonds priced over $50,000 were especially strong.
• By category, Tiffany’s strongest merchandise was as follows:
  • High-priced jewelry, especially statement diamonds
  • Engagement jewelry
  • Colored diamonds
  • Collections
  • Platinum jewelry
  • Proprietary rings (“Celebrations”)
  • Silver jewelry
• By category, Tiffany’s weaker categories were as follows:
  • Tabletop
  • Gift merchandise
  • Watches (this category had been strong in the past)
• In overseas markets, demand in Japan is improving.  The Asia-Pacific market is also posting solid results; Singapore and Australia are the strongest markets.  Europe was soft due to weakness in the U.K.  Canada and Mexico were strong. 
• The company launched e-commerce sites in both Japan and Canada in the third quarter. 
• Tiffany sold its equity interest in Temple St. Clair, and it closed the TSC store. 

Mass-Market Jewelers

Sterling Jewelers – Kay Jewelers, Jared, and regional brands – Total sales +11.8 percent (constant dollars); same-store sales +6.6 percent.   These gains were far ahead of any other major mass market jeweler. 

• Sales were strongest in August, with some modest weakening in September and October.  However, Signet management noted that sales were “solid” in all three months of the fiscal quarter.
• Sales were strong for both Sterling’s mall-based stores and for the Jared superstore division. 
• The average transaction was up about 10 percent in the third quarter; year-to-date, it was up about 12 percent.  The average ticket increased by about the same amount in both the mall stores and Jared.  More of Sterling’s customers have indicated their willingness to purchase higher-priced goods; as a result, Sterling’s merchandise mix now includes a greater mix of higher-priced goods.  About half of the average transaction value increase came from higher prices and about half from merchandising initiatives. 
• Sterling implemented selected price increases earlier this year; these are helping to drive total sales gains and a higher average transaction value.
• Strong categories include the Leo diamond, loose diamonds, and solitaire diamonds.  Fashion gold was also strong, boosted by marketing support from the World Gold Council.  In Jared, luxury watch demand was very strong. 
• The average transaction value at Sterling’s mall stores is about $310, while the average transaction at Jared is about $720. 

Finlay Enterprises – Operates leased jewelry departments in major U.S. department stores – Total sales +9.8 percent; same-store sales +1.3 percent.  Total sales would have been up 0.4 percent, if sales from the recently acquired Carlyle stores are eliminated. 

• Sales were strongest in the Bloomingdale’s and Parisian units.
• Strong product categories included the following:
  • Diamond bracelets
  • Diamond hoop earrings
  • Three-stone jewelry
  • Yellow gold
  • Right-hand rings
  • Diamond stud earrings
  • Silver with semi-precious and diamond stones
  • Big, bold colored stones
  • Moissanite

Zale Corporation – Total sales up 1.2 percent; same-store sales down 1.2 percent.  Several factors affected sales at Zale Corporation, including the following:

• Strong fine jewelry products were as follows:
  • Big bold color stone rings
  • Three-stone rings, pendants, and earrings
  • Right-hand rings
  • Proprietary collections and designer jewelry
  • Yellow gold jewelry
• Strong merchandise in the company’s kiosks included:
  • Big hoop gold earrings
  • Colored stones, semi-precious stones, and cubic zirconium
  • Diamond accent pieces
  • Yellow gold (about 70 percent of Piercing Pagoda’s business)
  • Cellphone charms (introduced at the end of the quarter)
• Same-store sales were up in the low to mid-single digit range for all brands except Piercing Pagoda and Zale.  Same-store sales were down in these two brands.
• Shifts in promotions hurt.
• Versioning activity hurt.  The company is creating different versions, by market, of its advertising and promotions. 
• High out-of-stocks hurt at the Zales Jewelers division due to delays in shipments of Indian-produced goods from flood-ravaged areas.
• The Gulf Coast hurricanes hurt.
• The company sold far fewer Italian charms in its Piercing Pagoda division. 
• Overall, total transactions in the quarter were down from a year ago. 

Whitehall Jewellers – Total sales down 7.0 percent; same-store sales down 9.0 percent.  Two key factors had a negative impact on Whitehall’s sales:

• There was a temporary interruption of virtually all merchandise deliveries to Whitehall due to its deteriorating financial condition.  Apparently, Whitehall is now receiving some shipments.
• Management’s attention was diverted by significant turnover of top executives. 
• Whitehall’s board says that the arrival of a new president, Robert Baumgardner, should help stabilize the management team and provide focus on the business.  Baumgardner was previously president of the Little Switzerland subsidiary of Tiffany & Co.  

Online Retailers

Blue Nile – Total sales up 23.9 percent.  Blue Nile has positioned itself as “the online diamond source.”  At the time of its initial public offering in May 2004, at least 82 percent of the company’s sales were derived from engagement diamonds (75 percent) and other diamond jewelry (7 percent). 

 

• In the September quarter, sales at Blue Nile were driven by several categories, including the following:
  • Diamond engagement rings
  • Wedding bands
  • Diamond earrings and pendants
  • Pearls and colored gemstones
  • Customized diamond jewelry
• The engagement ring category was by far the largest portion of the company’s sales mix in the September quarter, in part because there was no major holiday – such as Valentine’s or Mother’s Day – driving demand for non-engagement jewelry.  Last year, Blue Nile’s average ticket for an engagement ring was $5,558, more than twice as high as the average of $2,600 for the typical U.S. consumer’s engagement ring.  Wedding bands experienced the greatest unit growth in the quarter at Blue Nile. 
• In the September quarter, Blue Nile’s customer traffic was up about 15 percent, and its conversion rate (browsers-to-buyers) rose by about 10 percent.  Blue Nile’s average ticket was $1,773, above even with last year’s third quarter average ticket of $1,777.  In the second quarter of this year, the average ticket was $1,441. 

Odimo – Total sales down 8.7 percent. 

• The average ticket fell by about 5 percent to $445 in the quarter.  The number of orders of orders fell by just over 4 percent. 
• Jewelry and diamond demand fell by about 4 percent while demand for watches and luxury goods fell by 13 percent. 
• The total visitors to Odimo’s websites fell by 32 percent.