Harry Winston Q2 Diamond Sales Down 31%

(IDEX Online News) – Harry Winston Diamond Corporation announced a drop of 31 percent for its mining segment with sales falling to $61.5 million, versus $89.6 million in the comparable quarter of the prior year.

The company said the sales decrease was a combination of a 24 percent decrease in volume of carats sold during the quarter, ended July 31, and a 9.6 percent decrease in the prices achieved for rough. The approximately 0.43 million carats sold realized an average price of $142 per carat compared to approximately 0.57 million carats for an average price per carat of $157 in Q2 2011.

Like some other mining companies, Harry Winston, decided to hold onto some of its inventory until rough diamond prices rally again.

Sales in the luxury brand segment also dropped, to $115.4 million compared to $132.8 million in the comparable quarter of the prior year, down 13 percent or 11 percent at constant exchange rates.

Operating profit for the luxury brand segment, however, increased 16 percent to $8 million in the second quarter. The company said the increase in operating profit was primarily driven by positive product mix and a greater portion of high-value transactions in the comparable quarter of the prior year that generated lower-than-average gross margins.

Despite the falling prices, Harry Winston management was upbeat, especially with regard to the retail sector. "This quarter has seen transaction numbers and margins grow in our luxury goods segment even as we have withheld rough diamonds, from a soft diamond market, rather than sell at depressed prices," said Robert Gannicott, chairman and CEO.

In its outlook, Harry Winston said it expects the trend of wealth creation in emerging markets combined with increasing tourism to remain key drivers of increasing demand for luxury jewelry and watch products.

The company opened a salon in Harrods department store in London, England, in August and a directly operated salon is planned to open early next year in Geneva, Switzerland. In addition, a new licensed salon is expected to be opened in Kuwait City, Kuwait in late 2013. Harry Winston also plans to expand by 24 wholesale watch doors to 220 doors by the end of fiscal 2013.

Harry Winston supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik diamond mine.