Richemont Reports Widespread Sales Growth Led by Jewelry Sales but Cautions on Future Profits

Cie. Financiere Richemont SA said Wednesday that sales for the five-month period ended August 31 increased 29 percent year-over-year, led by strong growth for all of its brands throughout all regions. At constant exchange rates, sales increased by 35 percent.

However, the company cautions that the rising Swiss franc and uncertain economic conditions make the remainder of the year difficult to predict. In a move to stop the surge of the Swiss franc against other currencies, the Swiss National Bank capped the franc’s rate against the euro at an exchange rate below 1.20 francs to help the country’s exports. The Swiss currency dropped more than 8 percent against the euro Tuesday. It is unclear whether the SNB’s decision played into Richemont’s outlook.

On a region-by-region basis, sales growth in Europe, the company’s largest market, was robust (up 21 percent), reflecting purchases made by local clients and tourists, the luxury goods company said. The Asia-Pacific region continues to lead the way with a 46 percent growth in sales for the period. This stems from sustained consumer confidence in that region and increased investment by the company in its brands (known as Maisons) and distribution networks. Sales growth in the Americas increased a notable 26 percent, year-over-year. Sales in Japan increased 7 percent, despite the aftermath of the natural disasters which struck that country in March.

Retail sales grew 37 percent due to the expansion of the Geneva-based company’s retail networks, particularly in the Asia-Pacific region, and strong growth at the e-commerce site, Net-A-Porter.

The company’s wholesale business increased 22 percent during the five-month period.
 
All brands enjoyed solid growth. Jewelry brands (Cartier and Van Cleef & Arpels) led the way with 34 percent growth in sales for the period. Sales at watch brands (Jaeger-LeCoultre, Piaget, IWC, Baume & Mercier, Vacheron Constantin, Officine Panerai, A. Lange & Söhne and Roger Dubuis) grew 28 percent for the period. Montblanc sales increased 10 percent. Sales in a category listed as “Other” (Alfred Dunhill, Chloé, Lancel and Net-A-Porter.Com as well as other smaller brands and watch component manufacturing activities for third parties) increased 24 percent.

The company is also in a joint venture with Ralph Lauren’s watch and jewelry business.

Richemont’s net cash position for the period is 2.6 billion euros ($3.6 billion).

Richemont expects its sales and operating profit for the first six months of this year to be significantly higher than the comparative period.

“Based on the strengthening of the Swiss Franc between March 2011 and today, the Group will incur a significant translation loss on its cash balances,” the company said in a statement. Further, the accounting gain recognized in the comparative period relating to the acquisition of Net-A-Porter of € 101 million will not re-occur. Accordingly, Richemont expects attributable profit to be broadly in line with the prior year despite a significantly higher operating profit.”

Johann Rupert, Richemont executive chairman and Group CEO, added: “The rest of the financial year is difficult to predict. The problems of fiscal deficits generally and Euro zone difficulties in particular are likely to act as a drag on business prospects for companies in the period ahead, especially if the growth markets are affected. To hope for a continuation of the current good trading levels in such circumstances may be over-optimistic. In addition, we must keep in mind the demanding comparative figures against which sales in the coming six months will be measured.

“Moreover, the impact of the Swiss franc’s appreciation against the euro and other major currencies obviously poses a challenge for all Swiss exporters. For Richemont, with a significant production base, our headquarters and many of our Maisons located in Switzerland, the stronger Swiss franc will continue to be negative for our cost of sales and operating expenses, maintaining negative pressure on our margins.”

Centurion Jewelry Design Competition

Centurion is holding its fourth annual Emerging Designers Competition. Six winning jewelry designers will receive a complimentary exhibit at Centurion 2012, the 11th annual Centurion Show. The annual invitation only luxury jewelry trade show will be held Jan. 29-31, 2012, in Scottsdale, Ariz.

The competition is open to all designers, regardless of experiences, formal training or background in jewelry design, as long as they have never before exhibited in a fine jewelry show in the U.S.; have the ability to exhibit at a trade fair; and have the ability to supply high end retailers should they want to purchase the line.

The deadline for entries is October 15. For rules and how to participate, follow this link to the PDF entry form. The form must be completed and e-mailed along with three high resolution images and descriptions (the images may be sent in several emails if more than 3 megs each). Emails should go directly to hh@centurionjewelry.com. Again, the entry deadline for the competition is October 15.

Just in case the link doesn't work, here is the URL: http://www.h2consult.com/Centurion_2012_Emerging_Designers_Competition_Entry_Form.pdf 

The competition is sponsored by Stuller, a manufacturer and distributor of jewelry and jewelry related products based in Lafayette, La.

Movado Watch Sales Increase 32% and Goes from Loss to Profit

The Movado Rockefeller Center store, the only Movado boutique left in the Movado Group's restructuring plan.

The Movado Group said Thursday that net sales of its watches in the second quarter of fiscal 2012 increased 32.6 percent, year-over-year, to $113.2 million. On a constant dollar basis, net sales increased 25.5 percent compared to the prior year period. Income from continuing operations was $4.4 million, compared to loss of $3.2 million during the same period of the prior year.

“Our brands continue to experience very strong customer and consumer demand,” Rick Cote, Movado president and COO, said in a conference call with investors and media. “We continue to experience pressure on our gross margins due to a devaluing U.S. dollar versus the Swiss franc as well as product cost pressures. However, we have been able to offset these impacts with strong sales growth and our disciplined expense management growth.”

Movado Group, Inc. designs, manufactures and internationally distributes watches through its brands: Movado, Concord, Ebel and ESQ by Movado. In addition, it has licensing agreements for produce watches under the Coach, Hugo Boss, Juicy Couture, Lacoste and Tommy Hilfiger brands. The company is headquartered in Paramus, N.J., and Bienne, Switzerland, and has a manufacturing facility in Switzerland.

The company is in the midst of a multiyear plan to improve its profitability. Last year, it closed its boutiques (except for its New York's Rockefeller Center store) and is now focusing on its Movado and licensed brands, offering new products and expanding into China.

So far it seems to be working as the company experienced its second consecutive quarter of growth following losses in 2009 and 2010. Cote said all Movado brands experienced strong growth, in particular its Movado brand and licensing brand division. The China market grew by more than 50 percent in the first half of the year.

“While we experienced broad-based sales growth across all of our brand categories, our results continue to be driven by particularly strong performances in Movado and licensed brands both domestically and internationally,” Efraim Grinberg, Movado chairman and CEO, said in a statement.

Net income for the quarter, ended July 31, was $4.4 million, compared to a net loss for the second quarter of fiscal 2011 of $20.9 million, including the results of discontinued operations of $17.7 million. Operating income increased to $5 million in the second quarter of fiscal 2012 compared to operating loss of $2.2 million for the same period last year. EBITDA increased to $8 million compared to EBITDA of $1.5 million in the second quarter of fiscal 2011.

The company also reiterated its prior guidance for fiscal 2012 and continues to anticipate that EBITDA will range between $31.5 million and $33.5 million for the year and that net income will be in the range of $15 million to $16.5 million.

Grinberg said during the conference call that he expects sales to be better than first anticipated but but gross margins will “not be as anticipated,” due to the imbalances between the Swiss franc and the U.S. dollar and rising manufacturing costs.

“I think the top line will be a little better than what our guidance had been but when we’re done we see that positive being offset by some of the gross margin negatives,” he said. “That’s why we still see the bottom line in the range that we have given previous guidance on. Sales will be at the upper echelon and a little bit better and the gross margin will not be where we had originally anticipated.”

Gross profit for the company was $60.9 million, or 53.8 percent of sales, compared to $44.4 million, or 52 percent of sales in the second quarter last year, primarily due to the leverage gained on fixed costs and a favorable shift in channel and product mix, the company said.

Operating expenses rose 20 percent to $9.3 million due to increased marketing expenses to drive sales, salary increases, the reinstatement of certain employee benefits and performance-based compensation, the company said. In addition, there was an increase due to unfavorable foreign currency exchange rates (again, referring primarily to the rates between the Swiss franc and the U.S. dollar).

Jessica Simpson, Zale to Launch Jewelry Collection

Jessica Simpson will launch a diamond fashion jewelry collection available at Zale Corp. branded stores beginning in October.

The Dallas-based jewelry retailer made the announcement Tuesday. The Jessica Simpson collection will feature rings, earrings, pendants and bracelets, available in a range of affordable price points, the company said. Simpson’s collection will be offered exclusively at Zales Jewelers, Zales Outlet and Peoples Jewellers stores in the U.S., Canada and Puerto Rico.

In addition to being an internationally known recording artist, actress and television personality, Jessica Simpson has established herself as a fashion designer. The Jessica Simpson Collection extends into 22 product categories including shoes, apparel, accessories and fragrances.

“I have always wanted to design fine jewelry and am very excited to launch a new collection exclusively at Zale,” Simpson said in a statement. “Jewelry is a very personal expression that celebrates who you are and this collection is very much a reflection of who I am.”

Zale Corp. is a leading specialty jewelry retailer in North America. Its brands include Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Peoples Jewellers and Mappins Jewellers and Piercing Pagoda.

Zale Corp Q4 Sales Up 9.4%, Comp Sales Up Nearly 10%; Losses Also Rise

A Zales jewelry store worker in San Bruno, Calif. examines watch inventory.  Photo credit: Paul Sakuma / AP

Jewelry retailer Zale Corp. said Wednesday that fourth quarter sales rose 9.4 percent year-over-year to $377 million. Same store sales for the period, ended July 31, increased 9.8 percent, compared to a decrease of 2.1 percent during the same period last year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, same store sales increased 8.4 percent for the quarter.

However, the Dallas-based company—whose brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda—reported a loss of $32.6 million, or $1.02 a share, compared with $28.5 million, or 89 cents a share, a year earlier. The company said the main culprit was higher prices for gold, silver and diamonds.

“This quarter represents the third consecutive quarter of positive same store sales,” said Matt Appel, Zale Corp. chief administrative officer and chief financial officer. “Despite the headwinds imposed by volatility in commodity markets and the overall economy, our gross margin performance in the quarter and full year reflects the traction we are gaining in the marketplace.”

The company, which has 1,830 retail locations in the U.S., Canada and Puerto Rico, said gross margin on sales increased 6.4 percent to $193 million for the fourth quarter. The company achieved gross margin on sales of 51.3 percent, compared to 52.7 percent in the comparable quarter last year. Excluding last-in, first-out inventory charges of $7.9 million and $2.9 million for the fourth quarter of 2011 and fourth quarter of 2010, respectively, gross margin would have been 53.4 percent and 53.5 percent for the 2011 and 2010 quarters, respectively. The $5 million increase in LIFO charges for the fourth quarter of 2011 was due to rising diamond, gold and silver commodity costs.

Selling, general and administrative expenses for the fourth quarter were $204 million, or 54.1 percent of revenues, compared to $197 million, or 57 percent of revenues, in the same period last year. The company's operating loss for the quarter was $24 million compared to an operating loss of $31 million in the prior year quarter. Operating margin improved 270 basis points, to negative 6.4 percent, for the fourth quarter, compared to negative 9.1 percent in the same period last year.

The company recorded an income tax benefit of $1 million, compared to a benefit of $6 million in the comparable quarter last year. The 2010 quarter included a $4 million tax benefit related to net operating loss carrybacks pursuant to the Business Assistance Act of 2009. The company said it does not foresee any further benefits from this Act.

Inventory at July 31, stood at $721 million, compared to $703 million in the same period last year. The company had outstanding debt for the period was $395 million, compared to $296 million in the fourth quarter of the prior year.

2011 Fiscal Year Report After Jump

Consumer Confidence ‘Deteriorates’ in August

De Beers Beverly Hills store. Photo credit: Anthony DeMarco

The Conference Board Consumer Confidence Index, which improved slightly in July, plummeted in August. The Index now stands at 44.5 (1985=100), down from 59.2 in July. It is the lowest reading since April 2009. The Present Situation Index decreased to 33.3 from 35.7. The Expectations Index decreased to 51.9 from 74.9 last month.

“Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook,” said Lynn Franco, The Conference Board Consumer Research Center director. “A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade. Consumers’ assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence.”

Consumers’ appraisal of present-day conditions weakened further in August. Consumers claiming business conditions are “bad” increased to 40.6 percent from 38.7 percent, while those claiming business conditions are “good” inched up to 13.7 percent from 13.5 percent. Consumers' assessment of employment conditions was more pessimistic than last month. Those claiming jobs are "hard to get" increased to 49.1 percent from 44.8 percent, while those stating jobs are “plentiful” declined to 4.7 percent from 5.1 percent.

Consumers' short-term outlook deteriorated sharply in August. Those expecting business conditions to improve over the next six months decreased to 11.8 percent from 17.9 percent, while those expecting business conditions to worsen surged to 24.6 percent from 16.1 percent. Consumers were also more pessimistic about the outlook for the job market. Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes declined to 14.3 percent from 15.9 percent.

Kim Kardashian’s Wedding Band and Wedding Day Jewelry

The wedding band is shown with Kardashian’s 20.5-carat engagement ring. Photo source: entertainmentwise website

Jewelry designer Lorraine Schwartz played what appears to be an exclusive role in Kim Kardashian’s jewelry for her August 20 wedding to Kris Humphries.

“Kim chose a diamond eternity band set in platinum by Lorraine Schwartz, approximately 12 carats, with an estimated price tag of $60,000,” said Jewelry expert Michael O'Connor. “Kim clearly wanted the best quality wedding ring, and since the diamonds are set in platinum the setting won't fade or tarnish - making it the perfect symbol of enduring love.”

Kardashian's diamond headpiece and diamond drop earrings designed by Lorraine Schwartz. Photo credit: E News

All totaled, Kardashian wore approximately $10 million worth of jewels on her wedding day, which included a diamond headpiece and diamond drop earrings, also designed by Lorraine Schwartz, E News reports. The entertainment news media company will air the wedding as a two-part special October 8 and 9.