(IDEX Online) – Jewelry shoppers are ignoring the uncertain economy, weak housing market and high unemployment in the U.S. market. September jewelry and watch sales, both for the total industry as well as specialty jewelers, posted strong double-digit gains.

 

The graph below shows that September’s jewelry and watch sales gain was the second strongest in the past fifteen months.

 

Source: Dept of Commerce

 

While much of the jewelry industry sales increase – up nearly 15 percent for the month of September as measured by “dollars through the cash register” – is the result of price inflation related to polished diamond and precious metals prices, unit sales are up by an estimated 3 percent.

 

These sales trends tell us several things:

 

·         Jewelry and watch demand seems to be price inelastic, at least at the current price levels. Don’t get between a jewelry shopper and her desire for jewelry: she wants fine jewelry, and she’s willing to pay for it.

 

·         Since unit sales are up, fundamental underlying demand for jewelry is clearly strengthening.

 

·         Most jewelers are reporting more transactions, though the average transaction value is often slightly lower than in pre-recession days. This confirms that more jewelry shoppers are in stores buying jewelry.

 

Here’s the preliminary jewelry sales report for September 2011:

 

Source: Dept of Commerce

Total Jewelry & Watch Sales Strong

Total jewelry and watch sales through all retail outlets rose by 14.6 percent in September. After three months of low teen gains in April, May, and June, jewelry sales growth slowed modestly in July. The solid gains in August and September reflect a return to the strong gains last seen in the April-June period. September’s jewelry and watch sales in the U.S. market were an estimated $4.7 billion this year, up from last year’s estimated $4.1 billion in the same month.

 

Total jewelry (only) sales rose by 14.3 percent in September, as the graph below illustrates. Watch sales increased by 16.6 percent, as reported by the Department of Commerce. After lagging in 2010, watch sales gains have outpaced jewelry sales gains every month during 2011.

 

On a year-to-date basis, total jewelry and watch sales are up by 12.0 percent.

 

Source: Dept of Commerce

Watch Sales Show Exceptionally Large Gain

Watch sales in September among jewelers in the LGI Network (an NPD Group company) were up 12 percent on a same-store sales basis. This was moderately below watch sales as reported by the Department of Commerce, as the graph below illustrates.

 

Source: Dept of Commerce

 

Specialty Jewelers’ Sales Extremely Strong in September

Specialty jewelers’ September sales rose by a robust 21.7 percent (preliminary data, which IDEX Online Research believes will be revised downward). Jewelry and watch sales at “other” retailers – largely discounters – were up 8.9 percent.

 

Historically, “other” merchants have been taking market share from specialty jewelers. Earlier this spring, this trend reversed: specialty jewelers took market share in April, May and June; then, they gave up market share in July. In August and September, they re-took that market share from other merchants selling jewelry.

 

The graph below summarizes sales gains at both specialty jewelers and “other” merchants who sell jewelry.

 

Source: Dept of Commerce

 

Specialty jewelers’ sales were an estimated $2.1 billion in September 2011, up from last year’s estimated $1.7 billion, a dramatic 21.7 percent sales gain.

 

For the first nine months year-to-date, specialty jewelers’ sales gains rose by 13.5 percent, according to data from the government’s Department of Commerce.

 

The graph below summarizes monthly sales trends for specialty jewelers.  

Source: Dept of Commerce

 

Jewelry Takes “Share of Wallet” in September

Jewelry and watch sales gains continue to outpace sales gains for other retail categories. For the month of September, total U.S. retail sales were up 8.6 percent while retail sales, ex-automobiles, rose by 8.5 percent.

 

Despite nagging high unemployment and a host of other negative factors weighing on American consumers, they are still spending money on retail goods, especially big-ticket retail merchandise. One of the beneficiaries of this spendthrift mentality is the U.S. jewelry industry, which posted sales gains more than a third larger than total retail sales gains, as the graph below illustrates.

 

Source: Dept of Commerce

 

The Consumer Is Alive & Well In America

Year-to-date total retail sales (all merchandise categories) are up 8.1 percent through September, slightly below September’s monthly total retail sales gain of 8.6 percent. Year-to-date retail sales, ex-automobiles, are up 7.9 percent, somewhat below September’s 8.5 percent retail sales gain (ex-auto).

 

These strong year-to-date retail sales gains, coupled with even stronger gains in September, confirm that the U.S. consumer is alive and well – and ready to spend in the upcoming holiday selling season.

 

Outlook: Strong Gains Predicted

Based on nine months of 2011 sales data, the U.S. jewelry and watch sales could grow to as much as $70 billion for the full year ending December 2011, a gain of about 13-14 percent over 2010 sales levels, based on newly revised data from the Department of Commerce.

We continue to remain skeptical of the Commerce Department’s numbers: a gain in the mid-to-high single digit range seems much more reasonable to us. This would yield jewelry sales in the $65-66 billion range for the year. Further, over the next couple of years, we believe that jewelry sales gains will settle in at about 4 percent or so annually, assuming that inflation moderates to historic levels.