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Fitch Foresees Weak U.S. Retail Sales

Fitch Ratings predicts weak U.S. retail sales during the holiday season as economic pressures continue to strain consumer cash flow. In its “Retail Register” report, Fitch stated that apparel and home furnishing retailers would be hit hardest, while food-related shops would show relative strength. Discounters and warehouse clubs should continue to outperform other retail formats. Fitch expects many U.S. retail issuer ratings to remain at their current levels and anticipates that financial metrics for retailers will weaken due to the challenging sales environment.

Jewelry Repair Popular Among Wealthy Shoppers

In a recent survey conducted by the Luxury Institute, banks, at 47 percent, and jewelry repair, at 40 percent, were the most popular service businesses with wealthy shoppers. The youngest, wealthiest and highest-earning consumers all placed particular importance on having each of these businesses at high-end shopping centers. Two-thirds of wealthy shoppers said that the presence of high-end retailers, such as Neiman Marcus and Nordstrom, determines where they shop. Consumers younger than 55 were significantly more likely to flock to lifestyle centers. Two-thirds of those surveyed stated they felt more comfortable shopping somewhere with publicized security. The respondents were consumers with an average household income of $332,000 and an average net worth of $3.3 million.

Zale Predicts Stronger Christmas Sales

Neal Goldberg, Zale Corporation president and chief executive officer (CEO), predicted a stronger holiday season this year, despite a difficult economy. The company expects fiscal 2009 earnings of $1.10 to $1.25 a share, which beats Wall Street’s estimate of 90 cents. It expects same-store sales to range from negative 1 percent to flat. Goldberg stated that Zale’s stores in Canada are performing better than its U.S. stores, but the company plans to regain domestic market share as competitors, such as Friedman’s and Whitehall, go out of business. Zale’s fiscal fourth-quarter net loss was $4.9 million, or 15 cents a share, compared with a profit of $1.5 million, or 3 cents a share, one year ago. Excluding tax adjustments, the loss was 48 cents a share, below the 57 cents analysts expected. Fourth-quarter sales rose 6.1 percent to $456 million from $430 million. Christmas 2007 sales fell 7.3 percent.

EEOC Sues Sterling for Sex Discrimination

Sterling Jewelers Inc. violated federal law by discriminating against female employees at stores nationwide, according to charges filed against the company by the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC stated that Sterling Jewelers intentionally discriminated against female retail sales employees by maintaining a system that permitted or encouraged managers to deny female employees equal access to promotion opportunities and the same compensation paid to similarly situated male employees.

David Bouffard, vice president of media relations for Sterling, said “We take the allegations raised in this lawsuit very seriously.” Stating that an internal investigation failed to substantiate the allegations, he noted that the majority of Sterling’s store managers and employees are female.

The EEOC filed the case after a failed attempt to reach a voluntary settlement with Sterling. The EEOC is seeking monetary relief and an order requiring the company to implement new policies to prevent discrimination.

Court Dismisses Fortunoff Bankruptcy Case

A New York court dismissed jewelry and home furnishings retailer Fortunoff’s Chapter 11 bankruptcy case, according to a Reuters report. The company filed for bankruptcy in February and was purchased by NRDC Equity Partners, which owns the Lord & Taylor department store chain and plans to invest $100 million to help revive Fortunoff. Fortunoff had asked the U.S. Bankruptcy Court of the Southern District of New York to dismiss its bankruptcy case after reaching an agreement with its creditors. The company owed its junior secured lenders more than $19 million. Dismissing the bankruptcy case removes liens against Fortunoff’s property, allowing those lenders access to the company’s remaining assets.

In exchange, the junior lenders will contribute $850,000 to Fortunoff’s wind-down reserve, which will pay bankruptcy- related administrative expenses. Fortunoff also received approval to reject any remaining contracts or leases and to deny all pending motions.

Kwiat Opens New York Store

Kwiat opened a new retail store at 725 Madison Avenue in New York City. The opening was planned to coincide with the family-run business’ centennial year. The 1,000-square-foot store showcases a full range of offerings and includes a private viewing room upstairs.

Damiani Buys Rocca for $10 Million

Luxury jeweler Damiani has purchased Rocca for $10 million (EUR 7 million). Milan-based Damiani will pay $3 million (EUR 2 million) in shares and $6.6 million (EUR 4.5 million) in cash for Rocca. The acquisition is designed to enable the jeweler to strengthen its retail business.

Rocca has 22 stores that offer high-end watches and jewelry. The company generated revenues of approximately $57.4 million (EUR 39.2 million) in 2007 and experienced a net loss of approximately $2.9 million (EUR 2 million).

Gitanjali launches Luxury Watch Store

Gitanjali Lifestyle, the retail arm of Gitanjali Group, inaugurated Bezel, the luxury watch store. Bezel is a multibrand store that carries Nina Ricci, Just Cavalli, Morellato, Cavalli, Miss Sixty and Sector. Mehul Choksi, chairman of Gitanjali Group, stated that the firm sees immense potential in the fashion and luxury watch market in India, particularly given that consumer purchasing power is on the rise in the country.

Jewelia Necklace supports charities

A diamond necklace named Jewelia was sold to 13 women in a transaction that they claim changed their lives. The story began four years ago when the $37,000 necklace caught the eye of Jonell McLain.
She decided to approach friends to share the cost and recruited enough takers to make an offer, as reported on ABC News. Jeweler Tom Van Gundy agreed to a $15,000 price on the condition that his wife be admitted to the group.

The owners range in age from 50 to 62 and meet once a month to brainstorm ways to use the necklace for fundraising projects. They have raised thousands of dollars for charity. The women share ownership of the necklace, rotating possession.

Blue Nile Says Solitaire Demand Sinks

Blue Nile Inc. presented its second-quarter findings to investors during the Thomas Weisel Partners 2008 Consumer Conference in New York. Chief executive officer (CEO) Diane Irvine called the U.S. retail environment challenging, citing a downsizing in bridal purchases. Consumers were trading from solitaires to diamond bands, representing an average price difference of about $3,000. Consumers were also switching from platinum to white gold.

While there was no statistical evidence suggesting a slowdown in wedding or engagement planning due to the economy, Blue Nile chairman Mark Vadon said that anecdotal data suggested a weakening market. Vadon reminded attendees that buying the engagement ring was just part of the larger marriage investment, which also includes the cost of a wedding and setting up a new household.

In other Blue Nile news, the e-tailer has partnered with Bill Me Later Inc. to give online shoppers an alternative method of purchasing diamonds. Bill Me Later enables consumers to shop online without using a credit card. Blue Nile is offering a “no payment for 90 days” plan on purchases over $250. Bill Me Later charges an annual percentage rate of 19.99 percent.

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