Rapaport Magazine

Retail Bulletin

September 2007

By Rapaport
RAPAPORT... Signet Revenues Up

Signet Group plc revenues during its second quarter of 2007 rose 7.4 percent to $787.2 million, manifesting an underlying increase of 5.4 percent at constant exchange rates. In the United States, same-store sales — at Kay Jewelers and Jared — rose 2.2 percent for the quarter ending August 4. In the United Kingdom, same-store sales climbed 6.6 percent at H. Samuel and Ernest Jones.

For the first half, Signet revenues increased 9.2 percent to $1.6 billion. In the United States, same-store sales for the first half went up 2.7 percent, and in the United Kingdom, they rose 4.6 percent.

Zale Profits Up, Revenues Flat

For its fourth quarter ended July 31, the Zale Corporation reported net earnings of $1.5 million. Its earnings are up from a loss of $27.4 million one year ago. During the quarter, sales dipped slightly to $488 million, while comparable store sales fell 0.5 percent.

On an after-tax basis, earnings for the quarter include a reduction of $6.3 million. This is attributable to a benefit of $1.1 million for the net impact of derivative versus hedge accounting on gold and silver contracts, a delay in revenue recognized from the change to a lifetime jewelry protection plan, and a net tax benefit of $6.7 million related to a decision to reinvest certain undistributed foreign earnings, in accordance with Accounting Principles Board Opinion 23. These items aside, Zale reported no earnings in the quarter.

Net earnings rose 10.6 percent to $59.3 million for the fiscal year 2007. Same-store sales fell 0.2 percent, while revenues were flat at $2.44 billion.
Zale spokespersons expect fiscal 2008 comparable store sales to increase by as much as 2 percent, and GAAP earnings to come in by as much as $1.16 per share.

Tiffany Sees Mixed Results

In the second quarter of fiscal 2007, net sales at Tiffany & Co. rose 19 percent to $662.56 million, boosted by strong performance in its diamond jewelry products. The jewelry retailer reported that global comparable store sales grew 13 percent, while cost of sales rose 21 percent to $296.45 million.
Partly because of an after-tax charge of $23.58 million tied to the pending sale of its Little Switzerland division, the company’s net earnings fell 10 percent to $63.21 million in the second quarter. Net earnings from continuing operations increased 41 percent to $63.21 million.

For the half year to date, Tiffany’s net sales rose 18 percent to $1.26 billion and comparable store sales were up 11 percent, while cost of sales rose 20.6 percent to $564.85 million. Net earnings for the six months grew 3 percent to $86.63 million.

In the third quarter, Michael Kowalski, chairman and chief executive officer (CEO), predicts that the company will realize net sales growth of about 14 percent.

Finlay Loss Grows, Sales Flat

Finlay Enterprises released figures showing that the company extended its second quarter loss 67 percent to $8.5 million. Per share, net loss rose by 63 percent to 93 cents a share.

In August, the company reported its sales were more or less flat for the period ending August 4, at $148 million. Comparable store sales fell 3.6 percent. Selling, general and administrative expenses were flat at $70.27 million, as were cost of sales at $79.62 million.

Finlay expects to end the 2007 fiscal year with a net loss of 40 cents to 55 cents per share, and expects total sales would be in the $770 million to $790 million range.

Bulgari Sales Up

Bulgari S.p.A.’s sales for the second quarter of 2007 rose almost 8 percent to $358 million (€262.6 million). Same-store sales climbed 13.5 percent for the quarter ending June 30. While sales of both watches and jewelry experienced strong growth, it was jewelry that performed best, as sales climbed 12 percent to 153.6 million.

Bulgari broke down these results geographically, noting that sales across Europe rose 7 percent to $134 million (€98 million), and climbed 41 percent to $67 million (€49 million) in the Americas, while falling 3 percent in Asia to $137 million (€100 million).

Sotheby’s Revenues, Profits Up

Sotheby’s financial results for the second quarter ended June 30, 2007, were the best the company has reported to date. Revenues rose 37 percent to $339.5 million. Profits rose 48 percent to $107.3 million.

Higher full-time salaries along with higher equity compensation costs meant that salaries and related expenses rose 21 percent to $14.8 million. General and administrative expenses rose 42 percent to $13.1 million.

For the first six months of the current calendar year, revenues reached a record high, up 41 percent to $486.9 million. Profits rose 95 percent to $131.7 million. Diluted earnings per share from ongoing operations were $2.02 for the first half of 2007, a 77 percent jump from one year ago.

Blue Nile Sales and Profits Up

Exceeding the company’s expectations by about $5 million, online diamond retailer Blue Nile’s second quarter sales rose 27 percent to $72.1 million, company spokespersons reported.

Blue Nile’s second quarter ended July 1, 2007. Profits for the period soared 21 percent to $3.8 million, while international sales — Canada and the United Kingdom — rose 15 percent to $3 million.

The total cost of sales rose 25 percent to $57.2 million. The company held its selling and general administrative expenses at 14 percent of net sales. Gross profit as a percentage of net sales was 21 percent in the second quarter, up from 20 percent one year ago.

Amazon Reports Surge in Diamond Sales

Amazon.com reported that its sales of diamond jewelry rose 260 percent in the second quarter of 2007, an increase contributing to a “significant” rise in overall jewelry sales. Without disclosing full figures for the period, company spokesperson stated that sales of colored gemstones increased 169 percent, while revenues from sterling silver jewelry rose 107 percent.

Abazias Revenues Up

Online diamond retailer Abazias.com reported a particularly strong second quarter, in which revenue rose 58 percent to $1.7 million. Overall, the company increased gross margins — by 62 percent — to 21 percent during the quarter.

Saks Sales Up

The comparable store sales of luxury retailer Saks Incorporated rose 13.2 percent in its second quarter, ended August 4, while total sales rose 14.9 percent to $694.1 million. Saks reported $4.3 million in after-tax revenue, $2 million of which could be attributed to downsizing and consolidations following the closing of Saks department store group businesses in 2005 and 2006. But Saks was in the red in its year-to-date figures, undergoing a net loss of $13.6 million, which does not compare favorably with the company’s $26 million profit in the first half of 2006.

In the first half of 2007, the company’s comparable store sales rose 13.9 percent, and total sales went up 15.4 percent to $1.48 billion. In the view of Stephen Sadove, Saks chairman and CEO, comparable store sales, gross margin rate expansion, and meaningful expense leverage were all factors that contributed to the upswing in the second quarter.

For the remainder of the year, the company predicts comparable store sales growth in the high single digits.

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