Zale Corp. Holiday Comps Up 2.3%; Holiday Sales Total $567 Million

Jewelry and diamond retailer, Zale Corp., said Thursday that same store sales increased 2.3 percent for the combined months of November and December 2012, encompassing the entire holiday selling period. This increase falls short of the 5.9 percent rise in same store sales for the same period last year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, comparable store sales increased 1.6 percent for the holiday selling period, compared to an increase of 6.2 percent in the prior year period.

Revenues for the two-month period were $567 million, an increase of $3 million compared to $564 million in the same period last year. The increase in revenues is primarily due to the same store sales growth partially offset by revenues associated with the net decrease of 50 stores compared to last year.

“This holiday season, we focused on driving bottom line improvement,” said Theo Killion, Zale Corp. CEO. “Our comp performance, combined with an expected 100 basis point operating margin improvement, brings us closer to our goal of achieving positive net income for the fiscal year.”

Holiday selling period same store sales details are as follows:

* Zales branded stores, consisting of Zales Jewelers and Zales Outlet, posted an increase of 3.1 percent, compared to an increase of 10 percent in the same period last year. U.S. fine jewelry brands including regional brand, Gordon’s Jewelers, posted an increase of 2.2 percent. In the same period last year. U.S. fine jewelry brands same store sales rose 9 percent for the 2011 holiday season.

* Canadian Fine Jewelry brands, consisting of Peoples Jewellers and Mappins Jewellers, posted a same store sales increase of 2.7 percent. This increase follows a 0.2 percent rise in the same period last year. At constant exchange rates, Canadian Fine Jewelry brands posted a comparable store sales decline of 0.7 percent, compared to an increase of 1.7 percent in the prior year period.

* Piercing Pagoda, Zale Corp.’s kiosk Jewelry business, posted a same store sales increase of 1.7 percent, compared to a declined 2.1 percent for the 2011 holiday season.

In its outlook for the quarter ending January 31, Zale Corp. said it expects gross margin to be in line with the prior year quarter’s gross margin of 50.5 percent. Operating margin is expected to be approximately 7.5 percent, or 100 basis points higher than the prior year quarter, primarily as a result of improved leverage on selling, general and administrative expenses.

As previously announced, the company expects to achieve positive net income for fiscal year 2013.

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De Beers Diamond Sales Decline 14%

De Beers Group, the world’s largest producer of diamonds, reported a 14 percent drop in overall diamond sales and a similar fall in rough diamond sales for the first six months of the year. The company’s profits fell about 50 percent and it announced that it will reduce diamond output from its mines in response to the “challenging” conditions.

The diamond mining and sales company said total sales decreased 14 percent to $3.3 billion for the first six months of 2012, compared with $3.9 billion in the first half of 2011. Sales of rough diamonds by the Diamond Trading Company, the rough diamond distribution arm of De Beers, in H1 2012 were $3.1 billion (including those through joint ventures).

Profit before finance charges and taxation for the first half of 2011 was $502 million, down from $1 billion a year earlier.

The company blamed “lower demand and changing product requirements from sightholders (75 approved buyers of De Beers rough diamonds under long-term contracts),” the company said in a statement. “While overall consumer demand for polished diamonds remained relatively healthy, sightholder demand was impacted by increased stock in the cutting centers, tightening liquidity and challenging conditions in India. However, early indications are that the US market continued to perform well, and the Chinese market, while slowing considerably, still showed positive growth.”

In the first six months of 2012, De Beers’ production totaled 13.4 million carats, compared with 15.5 million carats in the first half of 2011.

Philippe Mellier, chief executive of De Beers, reportedly said the company will continue to reduce its output through the end of the year and allow its sightholders to hold onto their inventories for up to six months, far longer than normal.

In its outlook, De Beers says it “expects trading conditions in the mid-stream to remain challenging during the second half of 2012 … (and) expects to see moderately positive growth in global diamond jewelry sales for the full year 2012, albeit at relatively modest levels, especially when compared to the exceptional growth levels seen in 2011. In the short term, the USA, China, the Gulf and Japan are expected to contribute the bulk of the growth, while India and Europe are expected to remain weak.”

De Beers Diamond Sales Up 27%, Cautious Outlook

The De Beers Group said Friday that total sales increased 26 percent year-over-year to $7.4 billion. Sales of rough diamonds by the Diamond Trading Company, the company’s the rough diamond sales and distribution arm, increased 27 percent for the year to $6.5 billion—the second highest level of sales for the diamond giant. Diamond prices for 2011 rose 29 percent as diamond production fell 5 percent to 31.3 million carats, compared with 2010.

EBITDA for the year increased 21 percent to $1.7 billion with third party debt reduced to $1.3 billion, compared with $1.8 billion in 2010.

De Beers described 2011 as “a year of two halves.” The first “saw exceptional consumer demand growth which, when coupled with lower than historical levels of global diamond production, resulted in very strong polished and rough diamond price growth,” the South African-based company said. “Rough diamond prices in this period included an element of speculative buying in the trading centers.”

However, in the second half of the year demand fell as “both retail and cutting center sentiment was impacted by the challenging macro-economic environment, restricted liquidity (particularly in dollars) in the cutting centers and a slowdown in the rate of growth of consumer demand at retail,” the company said.

De Beers Diamond Jewellers, a diamond jewelry retail venture with LVMH, reported “good growth” in sales across all regions, with greater China particularly strong. “The China opportunity is a priority for De Beers, with further 2012 expansion plans following the opening of stores in Beijing, Tianjin, Dalian and a second Hong Kong store in 2011,” the company said.

De Beers Forevermark diamond brand continued its expansion as it entered India and the U.S. during the second half of the year.  Forevermark is now available in 658 retail doors across nine markets, an increase of 89 percent compared with 2010.

In its outlook, De Beers said that despite economic uncertainty and “barring a global economic shock,” it expects “to see continued growth in global diamond jewelry sales, albeit at lower levels than the exceptional 2011 growth,” driven by luxury goods sales, improving sentiment in the US (the largest diamond jewelry market), continued growth in China, and “the positive impact of the 2011 polished price growth on retail jewelry prices.”

On the production side, the company said it does not expect an increase in diamond carat production in 2012 and that it will “ramp-up profitable carat production as Sightholder demand dictates. In the medium to longer term, the industry fundamentals remain positive with consumer demand, fueled by the emerging markets of China and India, outpacing what will likely be level carat production.”

This should be the last time in the 80-plus-year history of De Beers that it will file an annual report under the ownership of the Oppenheimer family. On November 4, 2011, the family agreed to sell its 40 percent interest of De Beers to its main partner, Anglo American, for $5.1 billion in cash. The transaction is expected to close during the second half of 2012.

On Wednesday, De Beers named Gareth Mostyn as its new CFO and board member.

De Beers 2010 Sales Up 53 Percent

De Beers Group said Friday that total diamond sales in 2010 increased 53 percent year-over-year to $5.88 billion. Sales of rough diamonds in 2010 by the Diamond Trading Company (the rough diamond distribution arm of De Beers) totaled $5.08 billion, compared with 3.23 billion in 2009.

The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) grew to $1.43 billion, an increase of 118 percent over 2009.

The South African based-company said strong demand in 2010 drove a rebound in the prices of DTC rough diamonds by an average of 27 percent, to levels which are above those which during onset of the economic crisis. A considerably reduced cost base enabled De Beers to be highly cash generative with a free cash flow of $943 million, compared with $35 million in 2009.

As demand for diamonds from the industry increased, so too did De Beers production from its wholly owned and joint venture operations in Botswana, South Africa, Namibia and Canada, the carats recovered in 2010 increased 34 percent to 33 million.

“2010 was an extraordinary year that saw De Beers rapidly move from stabilization to strong recovery,” the world’s leading rough diamond company said in a statement. “The price of rough diamonds has recovered strongly as confidence returned to most parts of the diamond pipeline. Notwithstanding this, the industry is not back to pre-recessionary levels in terms of production or sales and a high degree of global uncertainty remains. While restocking picked up throughout the year, it was also clear that consumer demand rebounded, as evidenced by the extraordinary growth in China and India and the better than expected retail performance in the U.S. during the Christmas buying period.”

In Botswana, Debswana commenced the Cut-8 expansion project at Jwaneng mine. Cut-8 represents the largest ever investment in Botswana and is expected to yield 100 million carats worth approximately $15 billion over the life of the mine, which will be extended until at least 2025.

De Beers continued to expand its proprietary diamond brand, Forevermark, throughout Asia in 2010. Forevermark is now available in 348 doors globally (a 40 percent increase on the beginning of 2009), and will continue to expand in the rapidly growing Chinese market in the year ahead, the company said. Forevermark will launch in India in the first quarter of 2011 and the company said it is in an "exploratory phase" in the US, yielding positive early consumer research."

In March, De Beers concluded the refinancing of all its international and South African debt on satisfactory terms, extending the tenor of facilities to 2013. During November, the Group achieved normalized terms in respect of debt and EBITDA measurements, some two years earlier than planned.

At the end of 2010, net debt excluding shareholder loans, had fallen to $1.76 billion compared with $3.20 billion at the end of 2009.

“While the directors remain cautious about the diamond market in 2011, continued positive growth is expected, albeit at a lower rate,” the company said. “The world is not yet back to where it was prior to the onset of the economic crisis, and risks to growth remain. For the foreseeable future, continued recovery in global economic outlook and strong retail confidence are expected to underpin positive growth in consumer demand for diamond jewelry in 2011.”

The statement continued, “The U.S. market is expected to continue its recovery and the exceptional growth seen in China and India is expected to be sustained. Global economic expansion and retailer sentiment are supportive of further DTC sales growth in 2011, during which time total production for the De Beers Family of Companies is expected to reach 38 million carats, approaching full production which will, as planned, be achieved in 2012.

“In the longer term, the supply and demand dynamics of diamonds remain attractive. Diamonds are a finite resource and western consumer markets are recovering at the same time as demand growth in the emerging markets of China and India is expanding rapidly.”

Blue Nile Sales Up 0.8%

Diamond and fine jewelry Internet retailer Blue Nile, Inc. said Thursday that net sales for the third quarter rose 0.8 percent, year-over-year, to $67.5 million, led by non-engagement jewelry. The Seattle-based company said it expects strong sales growth in the fourth quarter.

Operating income for the company increased 9.8 percent to $4.2 million. Operating income represented 6.3 percent of net sales, compared to 5.8 percent a year ago. Net income increased 7.7 percent to $2.8 million.

Non-GAAP adjusted EBITDA for the quarter totaled $6.6 million, a record third quarter level. For the trailing twelve month period ended October 3, 2010, net cash provided by operating activities totaled $26.2 million and non-GAAP free cash flow totaled $24.3 million.

“We delivered record third quarter sales, operating income, non-GAAP adjusted EBITDA, and earnings per share in what remains a challenging consumer environment. During the quarter, sales trends were uneven and reflected consumer confidence levels, which were at historic lows,” said Diane Irvine, Blue Nile CEO. "Sales trends have improved in the current quarter, and we remain focused on providing an exceptional experience to our customers. Across the business, we are gearing up for our peak holiday season.”

The company said fourth quarter net sales are expected to be between $106 million and $115 million, representing a year-over-year growth of 3 percent to 12 percent compared to fourth quarter 2009.

Highlights for the third quarter, ended October 3, include:

* International sales grew 5.7 percent in the quarter to $9.3 million, representing a record 14 percent of total sales. Excluding the impact from foreign exchange rates, international sales increased 3.4 percent. The company reported strong sales growth in its Canada and Asia/Asia-Pacific markets, while sales were weak in the U.K. and Europe because of global economic concerns combined with weaker currencies compared to the U.S. dollar.

* Gross profit for the quarter totaled $14.6 million, compared to $14.8 million a year ago. As a percentage of sales, gross profit totaled 21.7 percent. Within product categories, sales growth was relatively stronger in non-engagement jewelry as compared to the diamond engagement category.

* Selling, general and administrative expenses for the quarter were $10.4 million, compared to $10.9 million in the previous year, representing 15.4 percent of sales, compared to 16.3 percent last year.

Alrosa Expects Strong Growth in Diamond Sales for 2010

Russian state diamond monopoly Alrosa said Monday its rough and polished diamond sales should show a year-over-year increase by 50 percent to $3.3 billion by the end of 2010, according to a published report.

In 2009, the company reportedly sold nearly $2.2 billion in diamonds. In the first eight months of 2010, the company sold $2.6 billion, and September sales are expected at $200 million.

Alrosa is one of the world's largest diamond companies, accounting for 25 percent of global production.