Retail Bulletin

RAPAPORT... U.S. Chain Store Sales Dip
March same-store sales dropped 0.5 percent this year at U.S. chain stores, according to the International Council of Shopping Centers (ICSC). Michael P. Niemira, the group’s chief economist and director of research, attributed the dip to Easter falling in March, rather than April, making for one less shopping day, higher gasoline prices and consumers’ concerns about the slowing economy, which have driven them to wholesale chains. Costco’s sales were up five percent from last year and drug stores experienced a year-over-year increase of four percent. Despite these obstacles, Niemira forecasted that April retail chain sales will rise between two and two and a half percent.

Signet U.S. Same-Store Sales Down
Signet Group ended its fiscal year on February 2, 2008, and reported that same-store sales fell 0.7 percent. Same-store sales in the U.S. declined 4 percent, but increased by mid-single digits in the U.K. Total sales rose 3 percent to $3.67 billion, while profits fell 19 percent to $215.2 million. Since the beginning of fiscal 2009, Signet has increased prices due to higher precious metals costs. Its store space in the U.S. is expected to increase by about 5 percent this fiscal year, down from the long-term target range of ten percent. However, an increased level of U.K. store refurbishment in 2008 is expected to result in a relatively flat group capital expenditure of approximately $140 million.

Finlay Hits Tough Times
Finlay Enterprises Inc. received notification from the NASDAQ Stock Market that it is no longer in compliance with marketplace rules because for 30 consecutive trading days, Finlay’s common stock has not maintained the minimum market value of $5 million for publicly held shares and was trading for less than $1 per share. Finlay was given 90 days, or until July 1, to meet the requirement for ten consecutive working days. If this deadline is not met, NASDAQ will notify Finlay that its securities will be delisted. In addition, Finlay was provided 180 calendar days, or until October 6, to regain a per-share trading price greater than $1. Finlay stated that it intends to consider other options if its common stock does not trade at an adequate level to regain compliance. Finlay operates jewelry counters and stand-alone specialty jewelry stores, including Bailey Banks & Biddle, Carlyle and Congress.

Finlay Enterprises ended fiscal 2007 with a $10 million net loss, which the company attributed to both slower business during the holiday season and increased operating costs. The poor showing moves the company into the red from a $4.4 million profit in 2006. Finlay’s sales for the year ended February 2, 2008, rose 13.1 percent to $835.9 million, but comparable store sales dropped 1.4 percent. Specialty jewelry sales more than doubled to $223.8 million, compared to $108.2 million in 2006.

Finlay reported that after accounting for discontinued operations, fourth-quarter net income fell 16.9 percent to $13.4 million, as sales for the three-month period grew 24 percent to $383.1 million. Comparable store sales decreased 6.4 percent. Selling and administration expenses saw a 15.3 percent hike compared to the final quarter of 2006, totaling $130 million.

Arthur Reiner, Finlay’s chief executive officer (CEO), noted that comparable store sales continued a decline during this fiscal year, slipping 5 percent in the first two months, but he predicted that in fiscal 2008, comparable store sales would either hold or increase 1 percent. Specialty jewelry sales are expected to increase 83 percent to approximately $410 million. Finlay plans to open ten new stores and close 15 during 2008, not including the 94 Macy’s counters the company lost due to the department store’s restructuring or the 47 Lord & Taylor counters that will be replaced by Fortunoff counters.

Richemont Sales Increase
Richemont, the parent of Cartier, Mont Blanc and Van Cleef & Arpels, reported that its jewelry store sales grew 16 percent to $4.16 billion (EUR 2.66 billion) for the year ended March 31, 2008. Overall group sales for the year rose 16 percent to $8.3 billion (EUR 5.301 billion). The group’s specialist watchmakers’ sales rose 20 percent to $2.16 billion (EUR 1.38 billion) with particularly strong sales from IWC and Jaeger-LeCoultre. Sales from Europe rose 14 percent at constant exchange rates. In Japan, sales in the fourth quarter were slightly lower from the previous year, while in the Americas, sales reached $1.58 billion (EUR 1.01 billion). For the year, sales at Richemont’s writing instruments stores rose 14 percent to $997.64 (EUR 637 million), while leather and accessories increased 6 percent to $480.8 million (EUR 307 million).

Harry Winston Revenue Up
Harry Winston Diamond Corporation reported that revenue for mining and retail combined rose 22 percent to $679.3 million for the fiscal year ended January 31, 2008. Profits increased 2 percent to $106.4 million. Net earnings for fiscal 2008 were hit by a $37 million difference between Canada’s dollar and the greenback. In total, a net foreign exchange loss of $43.4 million was recognized due to Canada’s stronger currency. The mining segment posted a 24 percent sales increase to $413.8 million, while the retail segment recorded a 17 percent increase to $265.5 million. Harry Winston completed ten rough diamond sales during the fiscal year, consistent with the prior year. Earnings from operations for the mining segment increased 53 percent to $220.7 million. The company’s share of diamond production at the Diavik Mine increased by 22 percent to 4.8 million carats for the year ended December 31, 2007. Other income, including interest income, totaled $2.8 million, down from $5.1 million in fiscal 2007.

Harry Winston retail reported an operations loss of $3.1 million, compared with earnings of $2.3 million last year. The company attributed the difference to increased investment in its international salon expansion. Harry Winston opened five new salons in fiscal 2008 and salon sales rose 17 percent to $265.5 million. Sales in the Asian market increased 35 percent to $71.7 million, sales in the U.S. rose 15 percent to $112.5 million and sales in Europe grew 8 percent to $81.4 million.

At the end of the year, the polished market showed strong sales growth in China, India and the Middle East, which offset more moderate demand from the U.S.

Amazon Sales Up
Amazon.com reported a 37 percent increase in first-quarter sales to $4.13 billion. Favorable exchange rates for the company’s businesses abroad in the quarter ended March 31, 2008, added $180 million to revenue, while profits rose by 30 percent to $143 million. Operating cash flow increased 42 percent to $1.04 billion for the past 12-month cycle. Free cash flow surged 51 percent to $790 million. During the quarter, Amazon.com launched Amazon TextBuyIt at www.textbuyit.com to enable customers to make purchases via text messages. The number of sellers using Fulfillment by Amazon, an inventory, packing and shipping service, rose by more than 50 percent. North American sales were up 31 percent to $2.13 billion. International sales for the U.K., Germany, Japan, France and China, increased 44 percent to $2.01 billion.

LVMH Jewelry and Watches Revenue Up
LVMH Moët Hennessy Louis Vuitton reported that revenue for its jewelry and watch business in the first quarter of 2008 rose 12 percent to $335.5 million (EUR 211 million) from one year ago. The category was the strongest performer in terms of growth. Wines and spirits slipped 7 percent, fashion and leather goods rose 7 percent, perfumes rose 8 percent and selective retailing rose 8 percent. LVMH’s total revenue rose 5 percent to approximately $6.4 billion (EUR 4 billion).

Article from the Rapaport Magazine - May 2008. To subscribe click here.