|Harry Winston saw a 98% increase in retail sales.|
Harry Winston Diamond Corp. saw its luxury retail sales nearly double along with a modest increase in rough diamond sales, but it wasn’t enough to lift profits for the Toronto-based company.
The company said Wednesday that second quarter consolidated sales increased 44.7 percent percent to 222.4 million year-over year, resulting in a 6 percent increase in gross margin to $72.2 million and an operating profit of $23.1 million, compared to an operating profit of $29.9 million in the comparable quarter of the prior year. Consolidated EBITDA was $43.8 million compared to $49.4 million in the comparable quarter of the prior year.
Despite the sales increase, net profits fell 23 percent to $10 million.
Harry Winston consists of two businesses. The first supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company, however, is internationally known for its second business as a premier diamond jeweler and luxury timepiece retailer with salons in key locations throughout the world, including New York, Paris, London, Beijing, Tokyo, Hong Kong and Beverly Hills.
The luxury brand segment reported a 98 percent increase in sales to $132.8 million for the period, year-over-year. At constant exchange rates, the increase was 81 percent. Included in the second quarter was $55.6 million of high-value transactions, which generally carry lower-than-average gross margins. Operating profit was $6.8 million for the quarter compared to $2.3 million in the same quarter of the prior year. EBITDA for the luxury brand segment was $10.1 million compared to $5.5 million in the comparable quarter of the prior year.
“Global retail demand, especially in the emerging economies such as China and India, has delivered both strong retail sales growth and strong rough diamond prices. Seeing through the effect of a small number of high-value, lower margin sales, our own jewelry and timepiece business shows solid growth in both sales and margin in the core bridal, timepiece and designed jewelry segments,” said Robert Gannicott, Harry Winston chairman and CEO.
Meanwhile, sales from its mining segment increased 3 percent to $89.6 million for the second quarter, year-over-year, resulting primarily from a 41 percent increase achieved in rough diamond prices, offset by a 27 percent decrease in volume of carats sold. The mining segment recorded operating profit of $16.3 million compared to $27.6 million in the comparable quarter of the prior year. EBITDA for the mining segment was $33.7 million compared to $44 million in the comparable quarter of the prior year.
“The market price increase in rough diamonds has more than compensated for two complete sales versus three in the comparable prior year quarter as well as the lower quality diamonds mined from the upper part of the current open pit,” Gannicott said
“Looking forward we continue to see strong global jewelry and timepiece demand from China while Japan and the Middle East improve and the U.S. remains subdued. On this basis we expect to continue to grow our own jewelry and timepiece business despite challenging economic conditions in the U.S. and Europe. Although we do not predict further near-term rough diamond market price increases we do see our own rough diamond sales price already improving.”