(IDEX Online) – U.S. jewelry sales in April were virtually equal to last year’s sales in the same month. This was a highly disappointing performance, especially in view of last year’s consistently strong double-digit gains in almost every month of 2011.

 

Total U.S. jewelry sales eked out a 0.7 percent gain during April, when compared to April 2011, according to the latest preliminary data from the Department of Commerce. This gain was well below our expectations, and it has caused us to temper our U.S. jewelry sales forecast for 2012.

 

Three factors had a negative impact on U.S. jewelry demand in April:

 

·        Timing of Mother’s Day Was Later This Year – Much of the weakness in April was related to the timing of Mother’s Day – later in May this year – and related promotions which were launched in early May this year, rather than in late-April, as is usual.

 

·        Difficult Sales Comparisons – Sales comparisons were particularly difficult in April. Last year’s April (2011) jewelry sales gain of 15 percent was the largest monthly gain during 2011, making this April’s sales comparison the most difficult of the year.

 

·        Weakening Economic Activity – Jewelry demand in April also reflects weakness in consumer spending, which is tied closely to economic activity. Earlier this year, there were encouraging signs about the near-term potential growth of the American economy. However, recent news has been less encouraging, and jewelry demand has suffered.

 

Specialty Jewelers’ Sales Decline Sharply

Sales at specialty jewelers declined by a dramatic 9.3 percent in April, compared to the same month a year ago, while jewelry sales at other merchants – mostly multi-line discounters – were up by an estimated 8.5 percent.

 

The disparity reflects the highly seasonal nature of specialty jewelers’ sales, which are driven by specific calendar events such as Mother’s Day, Valentine’s and Christmas. Jewelry sales at other merchants – mostly multi-line discounters – are far less seasonal, since a majority of these sales is fashion jewelry purchased on impulse.

 

April Jewelry Sales Highlights

The following table summarizes fine jewelry and watch sales trends as well as retail sales trends in the U.S. market for April 2012:

 

Source: US Dept of Commerce

 

Here are some high-level sales trends that occurred in the jewelry industry in April 2012:

 

·        Jewelry lost significant market share in April – Total retail sales in the U.S. market were up nearly 4 percent, and total retail sales, ex-auto, were up 3 percent. Total jewelry sales were barely up: +0.7 percent. Thus, jewelry lost “share of shoppers’ wallet” in the month. After strong sales gains in earlier this year, it appears that consumers slowed their spending on jewelry.

 

·        Specialty jewelers lost market share to other merchants – Specialty jewelers, with a sales decline of 9.3 percent, lost market share to other merchants – multi-line discounters, mass marketers and online sellers – who sell jewelry. These “other” merchants posted an estimated 8.5 percent gain in jewelry sales in April.

 

·        Jewelry / watch sales mix unchanged in April – Total jewelry (ex-watches) sales were up 1.0 percent in April. Jewelry sales (ex-watches) represented about 87 percent of total jewelry and watch sales, in line with historical levels. Branded jewelry sales declined sharply by 16 percent in April, according to data from the LGI Network. We believe consumers are telling the industry that “fashion” trumps “brands.” Branded jewelry sales have been flat or down for six of the past eight months; this is in contrast to stronger sales trends for unbranded jewelry.

 

·        Watch sales weakened – Watch sales, which were down 1.1 percent in April, were weaker than total jewelry sales. Data from the LGI Network also reflects similar weakness: LGI watch sales were down 2 percent, on a same-store basis during April.

 

·        Specialty jeweler sample confirms weak jewelry demand in April – April’s slowing sales trends were also confirmed by InStore magazine’s Brain Squad: only 42 percent of the jewelers reported an increase in sales, down from February’s 59 percent and March’s 53 percent.

 

The graph below summarizes recent monthly fine jewelry and watch sales trends for the U.S. market. Apparently, stubbornly high unemployment levels, uneven economic growth, foreign financial woes and unstable geopolitical situations – along with the vitriol associated with the upcoming 2012 presidential and congressional elections – have finally caused American shoppers to tighten their purse strings. The U.S. consumer doesn’t like uncertainty, and today’s world seems to reflect an unusually high level of uncertainty.

 

Source: US Dept of Commerce

 

Total Jewelry & Watch Sales Show Almost No Gain in April

Total jewelry and watch sales through all retail outlets were nearly flat: +0.7 percent in April. This gain was miniscule, when compared to the 11 percent gain for the full year 2011, and it reflects severely muted consumer demand for jewelry.

 

Since jewelry price inflation at the retail level was up just under 5 percent in April, it is clear that unit sales of jewelry declined by 3-4 percent during the month.

 

Total fine jewelry and watch sales in the U.S. market in April were an estimated $5.07 billion this year, up from last year’s estimated $5.04 billion in the same month.

 

Total jewelry (ex-watches) sales rose by 1.0 percent in April, as the graph below illustrates (red bars). Watch sales decreased by 1.1 percent, as reported by the Department of Commerce (blue bars). After lagging in 2010, watch sales gains generally outpaced jewelry sales gains during 2011. After four months of 2012, jewelry sales gains have slightly outpaced watch sales gains. However, it is too early in the year to draw any conclusions from this data.

Source: US Dept of Commerce

 

Watch Sales Momentum Slowed Significantly in April

Watch sales in April among jewelers in the LGI Network (an NPD Group company) were down 2 percent on a same-store sales basis. This reflected a slightly worse sales trend than the 1.1 percent watch sales decline reported by the Department of Commerce, as the graph below illustrates. Generally, the LGI data tracks reasonably closely with government sales data. LGI data tracks watch sales through all distribution channels on a same-store basis.

 

Source: US Dept of Commerce

 

Branded Jewelry Sales Plummet in April

Sales of branded jewelry, as reported by the LGI Network, have been particularly weak in recent months. During April, branded jewelry sales declined by a dramatic 16 percent, according to the LGI Network. This is a continuation of the negative trend that began more than six months ago. April’s branded sales decline is much worse than the modest jewelry sales gain of 1.0 percent, as reported by the Commerce Department and shown on the graph below.

 

Source: US Dept of Commerce

 

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 Post Extremely Weak April Sales

Specialty jewelers’ April sales declined by 9.3 percent, according to data from the U.S. Commerce Department. In contrast, jewelry and watch sales at “other” retailers – largely multi-line discounters – were up by an estimated 8.5 percent. Historically over the longer term, “other” merchants have been taking market share from specialty jewelers. In 2011, the “market share ball” bounced back and forth all year long; final figures revealed that specialty jewelers lost a little market share to other retail merchants who sell jewelry.

 

Sales at specialty jewelers tend to be more seasonal and more sensitive to calendar events than jewelry sales at other retail merchants. With the late Mother’s Day selling period, we were expecting specialty jewelers’ sales to be softer than prior months. However, the magnitude of the sales decline in April was far greater than we had forecasted.

 

The graph below summarizes sales gains at both specialty jewelers (blue bars) and “other” merchants (red bars) who sell jewelry.

Source: US Dept of Commerce

 

Specialty jewelers’ sales were an estimated $2.00 billion in April 2012, down from last year’s estimated $2.20 billion, a 9.3 percent sales decline.

 

The graph below summarizes monthly sales trends for specialty jewelers. As the graph illustrates, specialty jewelers’ sales had been weakening since the third quarter of 2011, but perked up considerably in February, only to return to weaker trends in March, followed by a disastrous April. We continue to expect the Department of Commerce to revise the February data downward.

 

Source: US Dept of Commerce

 

The weak April sales trends were confirmed by InStore magazine’s Brain Squad report that showed that only about 42 percent of all specialty jewelers in the magazine’s sample reported that their April sales were up, as the graph below illustrates.

 

Source: InStore Magazine

 

Jewelry Lost “Share of Wallet” in April

Jewelry and watch sales gains in April of 1.0 percent were below sales gains for other retail categories. For the month of April, total U.S. retail sales were up 3.7 percent while retail sales, ex-automobiles, rose by 3.0 percent.

 

It appears that nagging high unemployment and a host of other negative factors has finally caught up with American consumers. Last year, one of the beneficiaries of shoppers’ spendthrift mentality was the U.S. jewelry industry, which posted solid sales gains (red bars) versus total retail (all categories) sales gains (green bars), as the graph below illustrates. While jewelry’s market share was up during every month in 2011 as well as January 2012, it has fallen fairly sharply in February, March and April.

 

Source: US Dept of Commerce

 

Forecast: We’ve Scaled Back Our Outlook

The U.S. economy just can’t seem to get chugging along at its traditional pace. After some encouraging economic news early this year, recent developments indicate that economic growth may be decelerating. As a result, we have scaled back our jewelry sales forecast to a gain of five percent in 2012; previously, we were predicting a gain of six percent. We note, too, that inflation has slowed, so this tailwind won’t have nearly the impact that it did in 2011.

 

The graph below summarizes our sales forecast for the U.S. jewelry market for the next several years. If the U.S. jewelry industry achieves a five percent sales gain in 2012, total sales would reach $71.7 billion, up from 2011’s $68.3 billion.

 

Source: US Dept of Commerce & IDEX Online

We note that management at Tiffany & Co. also scaled back their sales forecast for 2012. The company had been looking forward to a 10 percent global sales gain; it now calls for a gain of 7-8 percent for the year.

 

May Sales Could Be Strong

After disappointing April sales, we expect May jewelry sales to show solid gains due to a later Mother’s Day. Both Zale and Sterling said their May sales were up double-digit levels due to a late surge in demand for Mother’s Day jewelry. However, this is likely to be an anomaly related to the timing of this important sales event; it is not indicative of a sudden rebound in jewelry demand from American consumers.