Internet Retail Sales Up 14%

U.S. e-commerce sales in the second quarter of 2011 increased 14 percent, year-over-year, to $37.5 billion, according to digital measuring company comScore Inc. This growth rate represented the seventh consecutive quarter of positive year-over-year growth and third consecutive quarter of double-digit growth rates.

“The second quarter of 2011 saw a continuation of this year’s solid double-digit growth trends in online spending, well ahead of the rate of growth in consumers’ overall spending,” said comScore chairman Gian Fulgoni. “As a result, it’s clear that consumers are continuing to shift to the online channel, with almost $1 in every $10 of discretionary spending now occurring online.”

The Reston, Va.-based company reports that growth rate in the quarter was primarily a function of an increase in the number of buyers (up 16 percent), with 70 percent of all Internet users making at least one online purchase in the quarter.

Fulgoni said that consumers are being won over by the convenience and lower prices of the e-commerce platform over other retail.

“At the same time, we are constantly reminded of an overall macroeconomic situation that is not indicative of a strong recovery,” Fulgoni added. “With economic growth remaining soft, the unemployment rate stubbornly high and financial markets in turmoil, consumers are less optimistic today than they have been in preceding quarters, which raises concerns for the future. We believe the third quarter will be an important indicator of which direction this economy is really headed and what that will mean for consumer spending.”

Other second quarter highlights include:

* The top-performing online product categories were: Consumer Electronics (excl. PC peripherals), Computer Hardware, Computer Software, and Event Tickets. Each category grew at least 15 percent vs. year ago.

* The top 25 online retailers accounted for 66.4 percent of dollars spent online, down from 67.7 percent a year ago and down from a peak of 69.9 percent in Q3 2010, as small and mid-sized retailers continue to regain lost market share.

Seized 43-Ct. Fancy Yellow Diamond Up for Online Auction

The feds, in its duty, confiscate and sell many items but this one is quite a beauty: A 43.51-ct. fancy intense yellow diamond. This internally flawless cushion modified brilliant cut stone will be available for auction September 6 – 9 at online auction site, Bid4Assets. The minimum bid is set at $900,000 and is currently on preview on the auction website.

The diamond, which measures about an inch in length, was seized in a drug sting in 2006 by the U.S. Marshals Service Northern District of Ohio. The feds had the diamond authenticated by the GIA (REPORT 15154097, June 8). However, the origin of the diamond cannot be determined.

This diamond spans 1.42 length-to-width ratio. It has a pure yellow hue with no green or orange modifying color and the color distribution is very even with no visible zoning present, according to a joint statement from USMS and Bid4Assets. “The diamond is believed to be one of the world’s most perfect and flawless canary yellow diamonds.”

The diamond belonged to Ohio businessman Paul Monea, according to court documents. Monea was convicted of money laundering and conspiracy in 2007 in U.S. District Court in Akron. He tried to sell the gem, known as the “Golden Eye,” to undercover agents posing as  brokers for a South American drug cartel.

The USMS requires that bidders submit a refundable pre-bid deposit of $180,000 prior to placing a bid. Instructions for submitting the deposit can be found on the auction listing page.

There will be a viewing held for this diamond from August 29 till September 2 in Cleveland, Ohio. Only serious, qualified buyers who have submitted a deposit may view the diamond. To request an appointment time, send an email to Inspections@bid4assets.com. Interested buyers can contact Bid4Assets with any questions by sending an email to service@Bid4Assets.com or by calling 877-427-7387.

Gone Fishing

Since Friday I have been taking an unexpected but much needed break from work and from my computers. I plan on extending this respite until Tuesday. I'll be back full time on Wednesday. See you then.

Blue Nile Q2 Sales Up 5.1%, Net Income Up 1.3%

Online diamond and jewelry retailer, Blue Nile, Inc., reported Thursday that net sales increased 5.1 percent, year-over-year, to $80.5 million, a record second quarter sales level. Net income totaled $2.8 million, up 1.3 percent.

Despite the growth in revenue, increasing diamond and precious metals prices as well as weak consumer sentiment has had a negative impact on sales, particularly in its traditional bridal jewelry market. Growth for the period came from “non-engagement” jewelry, such as less-expensive colored-gemstone jewelry, and international sales, which grew 40.7 percent to 12.8 million, Diane Irvine, Blue Nile CEO said Thursday during a conference call with investors and the press. The Asia-Pacific region grew 100 percent to $5 million. Excluding the impact from changes in foreign exchange rates, international sales increased 29.7 percent.

Diamond prices increased 20 percent during the past year, Irvine said. Round diamonds experienced the largest price hike, rising 40-percent since last year. As an example, Irvine said a 1-ct. round diamond which cost $6,000 a year ago costs $9,000 today.

“While we delivered record second quarter sales and non-GAAP adjusted EBITDA, our results were impacted by rapidly rising diamond and metal prices amid a weakening consumer environment in the U.S.,” Irvine said in a statement. “Despite these external headwinds, we achieved sales growth across all product categories, including double-digit sales growth in the non-engagement category. We also experienced strong growth in our international business. In addition, we generated higher gross margins for the quarter and achieved our earnings per share stated guidance while investing in marketing and our international business.”

Operating income for the period, ended July 3, totaled $4.3 million, representing an operating margin of 5.3 percent of net sales.
Non-GAAP adjusted EBITDA for the period, ended July 3, totaled $6.9 million. For the trailing 12-month period, ended July 3, net cash provided by operating activities totaled $33.4 million compared to $24.1 million, year-over-year. For the same trailing 12-month period, non-GAAP free cash flow totaled $28.7 million.

Gross profit for the quarter grew 6 percent to $17.2 million. As a percentage of net sales, gross profit was 21.3 percent compared to 21.1 percent for the second quarter of 2010.

In its outlook, Blue Nile says that it expects net sales to be between $71.5 million and $74 million for the third quarter, ending October 2. Irvine, said during the conference call, noting the company is being cautious in its forecast because of rising prices and weak consumer sentiment. She added that the third quarter is usually the slowest month for bridal jewelry because there are no holidays during this period. But also said it is the period where the company’s margins are often the highest.

Tatler Readers to Virtually ‘Try On’ Million Dollar Rings

The British magazine of glamorous lives and lifestyles, Tatler, is bringing augmented reality to its pages. Starting Thursday, those who have purchased the magazine’s September issue will be able to virtually “try on” rings worth millions of dollars.

Augmented reality is an engaging way of combining live video with computer-generated data, visualizations and sound for a live direct or an indirect view of a physical, real-world environment. The magazine will release the details of how to use this technology with its website tomorrow, but let me explain how it will most likely work.

The September issue of Tatler (to be released Thursday) will contain a page with a seemingly generic image of a ring. Just cut out the image and place it on your finger. Then you need a computer and a webcam. Go to the Tatler website, find the “Try Me” page. Following the directions, place the paper ring on your finger in from of the webcam and an image of an actual will appear on the computer screen. It will be as if you are looking in the mirror trying on the actual ring. There will most likely be screen prompts that will allow you to try on different rings.

And what an assortment of rings you’ll be able to virtually wear. International jewelry brands featured in this AR-enhance piece of editorial are Boodles, Cartier, Chanel Fine Jewelry, Chopard, De Beers, Fabergé, Graff, Harry Winston, Louis Vuitton, Mikimoto, Tiffany and Van Cleef & Arpels.

The AR is being provided by Holition, a U.K.-based company that provides 3D augmented reality solutions and specializes with luxury providers. It’s a name that regular readers of Jewelry News Network will no doubt recognize as it has graced these electronic pages through its projects with De Beers, Tissot, Tacori and Boucheron.

Tatler, which claims its roots to 1709, calls itself the oldest magazine in the world.

“What excites me is that we have brought together the oldest magazine in the world with an industry steeped in heritage and tradition—and combined the two to create a digital innovation,” said Jessica Walsh, Tatler’s jewelry editor. “Digital technologies are changing the way in which people interact with both media and brands and I am excited to be contributing to this shift.”

Pandora Q2 Sales Down in Key Markets, Downgrades Outlook, CEO Resigns, Company Blames Price Increases and Poor Execution

Has the bubble burst for Pandora? The Danish company known for its charm jewelry announced the sudden resignation of its CEO, Mikkel Vendelin Olesen, effective immediately due to lower-than-expected growth, which the company blames on commodity price increases and “inadequate” execution.

“Although our price increases combined with some destocking are significant contributors to our slowdown in sales and profitability, our own inadequate operational sales, and marketing execution is as big a factor,” said Allan Leighton, Pandora board chairman.

Marcello Bottoli was named the interim CEO as the company, which experienced spectacular growth in recent years and a $2 billion IPO in October, 2010, seeks a permanent replacement.

“The re-set of our affordable luxury positioning, improved operational execution and restoring growth trajectory is now the focus of our company,” Pandora said in the same statement. “This re-set will take up to 18 months to see through. In addition, the company has instigated a strategic review to test or confirm certain elements of the company strategy.”

The announcement came following the early release of a condensed second quarter earnings report Tuesday that contained negative growth rates in its biggest markets and a downgraded outlook. The financial report was scheduled to be released August 16. No reason was given for the early release and the full report will still be issued on the expected date.

The company changed its outlook from expecting a revenue growth of no less than 30 percent for 2011 and an EBITDA margin of minimum 40 percent to 0 revenues and EBITDA margins in the low thirties for the year.

After the release of the financial report, Pandora stock fell a spectacular 65 percent, according to news reports.

Pandora reported that revenue increased 3.6 percent to 1.4 billion Danish kroner ($265.3 million). In the Americas, revenue increased 16.2 percent. However, sales in the U.S., its largest market, fell by 0.7 percent. The U.S. accounted for 39.2 percent of all sales during the period for Pandora.

In Europe it was even worse as sales declined 11.9 percent. The U.K. and Germany, its two largest markets in Europe, fell 13.1 percent and 20.1 percent, respectively. The U.K. accounted for 11.9 percent of all sales, down from 14.2 percent in the second quarter of 2010. Germany accounted for 8.5 percent total group sales, down from 11.1 percent in the second quarter of 2010.

The Asia-Pacific region increased 7.6 percent for the period. However, in Australia (another large market for Pandora), revenue was down 14.6 percent.

The company implemented price increases in all markets during the first quarter except in Australia where it increased prices in April 2011. Price increases in Germany were implemented at the end of first quarter. “Our price increases introduced during H1 2011 have had a significant negative impact on our volumes in the quarter,” the company said.

Other financial highlights include:

• EBITDA decreased by 6.2 percent to 512 million kroner ($97 million) resulting in an EBITDA margin of 36.8 percent compared to an EBITDA margin of 40.7 percent for the second quarter of 2010.

• EBIT decreased by 8.3 percent to 440 million kroner ($84 million) resulting in an EBIT margin of 31.6 percent compared to a EBIT margin of 35.7 percent in Q2 2010

• Reported net profit increased by 56.1 percent to 626 million kroner ($119.3 million), compared to a net profit of DKK 401 million kroner ($76.4 million) in the second quarter of 2010. Adjusted for revaluation of the CWE earn-out provision based on revised outlook for PANDORA CWE, second quarter net profit decreased by 17.7 percent to 330 million kroner ($62.9 million).

Gemfields Kagem Mine Posts Stong Gains

Miners at the Kagem emerald mine in Zambia. Photo credit: Gemfields

Mining company Gemfields has reported record annual production from its emerald mine in Zambia with a jump in grades per ton and a cut in production costs.

In an operational update for its fourth quarter and full year to June 2011, the company says annual production increased 90 percent to 33 million carats versus the previous year, as reported by the Proactiveinvestors financial news service. Gemfield's 75 percent owned Kagem mine in Zambia—the single largest emerald mine in the world. It is currently the company’s only operating emerald mine. The mine debt free, the company said.

Grade for the year came in at 478 carats per ton versus 286 in prior year, and per carat production costs were reduced by 41 percent to 43 cents per carat, according to the report. Rock handling costs for the year fell 25 percent to $3.70 per ton.

The final quarter of the year alone produced 10.8 million carats at a grade of 500 carats per ton and a unit cost of 32 cents per carat.

At its recent July auction of high quality rough emeralds, the company placed 1.07 million carats and successfully sold 740,000 carats to generate record sales of $31.6 million. Per carat prices at the July 2011 sale improved by 63 percent to 42.71 per carat, compared with its December 2010 auction.

So far, the company said it has completed seven auctions in the past two years, generating total revenue of $87.5 million.