Retail Bulletin

RAPAPORT... Consumer Savings Erode

The U.S. Department of Commerce reported that personal savings in March 2008 totaled $25.2 billion, a 33 percent drop from $37.7 billion in February. Real personal consumption expenditures (PCE) — consumer spending adjusted to remove the impact of price increases — was flat for the month. The PCE price index rose 0.3 percent from one year ago and personal incomes grew 0.3 percent.

Zale’s Clearance Increases Sales

Zale Corporation’s clearance strategy boosted sales in the third quarter ended April 30, and the company expects promotional activity to intensify next quarter. Same-store sales rose 5.8 percent, while total sales grew 6.2 percent to $477 million. The company reported a net loss of $17.4 million, up from a loss of $5 million one year ago. Year-to-date revenues fell 2.4 percent to $1.68 billion, with comparable store sales down 2.3 percent. Neal Goldberg, Zale’s president and chief operating officer (CEO), plans to permanently reduce inventory by over $100 million.

Signet’s U.K. Sales Grow

Signet Group’s sales in the U.S. fell 0.2 percent to $630.9 million and same-store sales fell 4.7 percent for the quarter ended May 3, 2008. But in the U.K., sales rose 5.1 percent to $191.4 million and same-store sales grew 5.3 percent. At constant exchange rates, U.K. sales rose 4 percent. Same-store sales in the U.S. fell 2.5 percent for the quarter, while total sales increased 1 percent to $822.3 million. Total group sales rose 0.7 percent at constant exchange rates.

Whitehall’s Profits Decrease

Whitehall Jewelers Holdings reported a slump in sales and profits for its fourth quarter ended February 2, 2008. Net sales for the three months fell 17 percent to $85.3 million, and comparable store sales decreased 13.8 percent. The Chicago-based company recorded a net loss of $24.6 million, compared to net income of $900,000 one year ago. The loss included $23 million in noncash impairment charges. For fiscal 2007, Whitehall’s net sales fell 8.8 percent to $242.9 million, and comparable store sales dropped 7.5 percent. A sales decline of $6.6 million was attributed to 18 store closings. The company acquired 78 retail locations from Friedman’s and Crescent Jewelers for $14.3 million in April.

Finlay’s Jewelry Store Sales Rise

Finlay Enterprises’ standalone stores helped push its first-quarter sales up 26 percent to $205.3 million for the period ended May 3, 2008. Carlyle, Congress and Bailey Banks & Biddle contributed sales of $77.7 million, an increase of 185 percent from $27.2 million one year ago. Comparable store sales at the company fell 4.5 percent. Finlay purchased Bailey Banks & Biddle from the Zale Corporation in November 2007.

Bulgari’s Net Profits Down

Bulgari Group reported that its net profits for the first quarter fell 4.6 percent to $35.4 million (EUR 22.8 million), down from $37 million (23.9 million) in the same period last year, as a result of increased operating expenses and a weaker demand for watches and accessories. The luxury retailer’s total revenues were up 3 percent to $359 million (EUR 231.7 million). However, U.S. sales dropped 8.9 percent overall. Francesco Trapani, chief executive officer (CEO), forecasted that net profits would grow by 8 to 12 percent for the year.

Sotheby’s Revenues Fall

Sotheby’s first-quarter revenues fell 12 percent to $129.3 million for the period ended March 31, 2008. The drop was attributed to lower auction commission margins. Net auction sales increased a modest 2 percent. Sotheby’s reported a net loss of $12.4 million — down from a profit of $24.3 million in the prior period. Results included a 12 percent increase of $6.4 million in salaries and related costs due to higher full-time salaries and stock compensation expenses over the period, which were partially offset by lower employee benefit expenses.

Blue Nile’s International Sales Soar

Blue Nile’s first-quarter sales rose 3.8 percent to $70.5 million for the three months ended March 30, 2008, with the company’s international business growing 124 percent to $5.7 million. Net income fell 18.7 percent to $2.6 million, while operating income for the quarter sank 17.9 percent to $3 million. Gross profit as a percentage of sales increased to 19.8 percent, compared with 19.5 percent for the first quarter of 2007. Blue Nile’s estimates for second-quarter growth range between 0 and 5 percent.
The firm appointed Marc Stolzman as chief financial officer (CFO), effective June 9. Stolzman joins Blue Nile from Imperium Renewables, a biodiesel technology firm. He previously held several executive positions at Starbucks Coffee Company, including senior vice president of finance and business development for its international unit.

Buy.com Profits Climb

Internet retailer Buy.com reported that profits grew 146 percent to $1.4 million in the first quarter of 2008, marking its sixth consecutive profitable quarter. Buy.com claims to have 11 million customer accounts on its site, which offers a range of items, including jewelry, consumer electronics, books, music, toys and goods for the home.

QVC Buying Favors Jewelry

QVC, owned by Liberty Media Corporation, reported a shift in sales from home products to jewelry and accessories during the first quarter. The average selling price increased 4 percent from $46.04 to $48.09, while the total units shipped declined to 26.9 million from 27.8 million. Overall revenue at the network rose 5 percent to $1.8 billion. The company’s U.S. revenue in the first quarter increased to $1.2 billion and operating cash flow increased 1 percent to $281 million.

The company’s international revenue increased 15 percent to $589 million due to favorable foreign currency exchange rates, greater sales to existing subscribers in Germany and subscriber growth in the U.K. and Japan. Initial product margins were lower in the home and jewelry product categories. The U.K. continued to show positive results, with revenue increasing 11 percent. QVC Japan’s net revenue grew 4 percent in local currency, the first increase since the first quarter of 2007.

ShopNBC’s Jewelry Margins Fall

ShopNBC, the 24-hour television shopping network, reported first-quarter results that were considerably lower than the company’s estimates, according to John Buck, ShopNBC’s executive chairman. Sales fell 17 percent to $156.3 million. To lower inventory levels of high-ticket jewelry items, the company made aggressive clearance markdowns at the end of the first quarter, reducing margins. Buck estimated that a product mix change accounted for a 4 percent decline in sales. The company reported a loss of $17.6 million, down from a profit of $34.4 million one year ago.

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