RAPAPORT...
IDE Warns Against Private Debt Settlements
In a letter issued to Israel Diamond Exchange (IDE) members, Avi Paz, president of the IDE, reported several incidents in which diamond companies reached private arrangements to return goods in lieu of making the necessary payments, rather than doing so in a collective manner through the appropriate exchange bodies.
Paz stated that if the IDE concludes that such an agreement has caused financial harm to its members, the organization will take action against the responsible parties, including possible membership revocation. Paz reminded members that through the exchange’s arbitration committee, they can still claim full repayment of a debt that has been settled under duress, even if the settlement agreement has been reached in writing.
Israeli Police Arrest Two in Bourse
Avi Paz, Israel Diamond Exchange (IDE) president, called police to confront two Israeli diamond dealers accused of trying to evade their $1 million-plus debt to other diamond companies. Jacob and Gil Eizenman, the father and son who run Jacob Eizenman Diamonds, were subsequently arrested.
The dealers claimed insolvency after a parcel of diamonds, valued at around $1 million, was allegedly stolen from them en route to London. The story of the robbery aroused suspicion in the bourse, with diamantaires questioning its credibility. In an unprecedented move, Paz decided to call the police to check its authenticity, rather than having the IDE deal with it through internal arbitration.
WFDB Urges Trade to Keep Positive Attitude
The World Federation of Diamond Bourses (WFDB) urged its members to keep a positive long-term perspective for the diamond and jewelry sector, after the lull in consumer spending resulted in a lackluster holiday sales season. “Consumers are shell-shocked at present and as such, they instinctively cut back on spending,” Avi Paz, WFDB president, noted in a statement on the organization’s website.
The WFDB stressed that the fundamentals of the diamond business are sound and that the industry will emerge healthy from the current economic downturn. The organization added that research has shown that diamonds lead the luxury product category by a large margin.
JVC and NCDIA Publish Color Diamond Guide
The Jewelers Vigilance Committee (JVC) and Natural Color Diamond Association (NCDIA) released “The Essential Guide to the U.S. Trade in Color Diamonds.” The Guide was developed in response to inquiries from the jewelry industry about the laws governing the manufacture, sale and marketing of color diamonds. It discusses the geology of natural color diamonds, defines natural, synthetic and simulated diamonds and the treatments used to alter the color of diamonds. To download the guide, visit JVC’s website, www.jvclegal.org, or NCDIA’s website, http://www.ncdia.com/.
U.S.
Customs Seizes Diamonds at JFK
Officers of the U.S. Department of Homeland Security’s (DHS) Customs and Border Protection (CBP) seized diamonds worth more than $1.2 million at New York’s JFKInternationalAirport. Authorities stated that a 54-year-old U.S. citizen arriving on a flight from Tel Aviv was selected for examination by customs officers. Though the passenger claimed nothing on his written declaration of items acquired abroad, when officers examined his baggage, they found receipts for various diamonds.
Officers gave the man a pat-down and discovered two sets of diamond earrings and a 20.39-carat, emerald-cut yellow diamond in his pocket, authorities stated. The passenger claimed that the diamond earrings are worth $300,000 each and the emerald-cut diamond is worth $600,000. The jewels were seized and the man faces a maximum penalty equal to the domestic value of the undeclared merchandise and forfeiture of the jewels. Customs officials stated that the suspect works in the jewelry industry.
Israel
Names Top 25 Exporters
Israel
’s Ministry of Industry, Trade and Labor published its list of the country’s top 25 diamond exporters of 2008, which exported a combined $2.6 billion in polished stones during the year. The top 25 companies on the 2007 list exported $3.2 billion worth of goods. Lev Leviev Diamonds (LLD Diamonds Ltd.) was again Israel’s largest exporter of polished diamonds, despite a 20 percent decline in the company’s exports from 2007. The list did not include 17 companies that had total net exports of $797 million, as these companies requested that their data not be published. Notably absent from the 2008 list was Moshe Namdar and Co., ranked as the third-largest exporter in 2007 at $199 million.
Company Net Exports
(in millions of $)
1. LLD Diamonds Ltd. $417
2. Leo Schachter Ltd. $352
3. A. Dalumi Diamonds Ltd. $182
4. Yahalomei Espeka International Ltd. $159
5. Yerushalmi Bros. Diamonds Ltd. $150
6. A.A. Rachminov Diamonds (2000) Ltd. $141
7. P.D.D. Diamonds Ltd. $121
8. MID House of Diamonds Ltd. $111
9. Niru Diamonds Israel (1987) Ltd. $91
10. SN Asia (Israel) Ltd. $86
11. Poligem Ltd. $71
12. Samroz Ltd. $66
13. Zilberberg Diam Ltd. $63
14. Yondor Diamonds Ltd. $62
15. Kuperman Brothers Ltd. $57
16. Arabov Group Ltd. $56
17. Novel Collection Ltd. $52
18. Rachminov Diamonds (Israel) 1891 $51
19. Masingita Ltd. $49
20. Ofer Mizrahi Diamonds Ltd. $48
21. Eshed Diam Ltd. $42
22. Eran Diamonds (Yehuda Sayag) $37
23. BETA Diamonds Ltd. $37
24. B.L.I.D. International Ltd. $34
25. Waldman Diamonds (W.D.C.) Israel Ltd. $32
President Bush Altered Burmese JADE Act
Former President George W. Bush waived a provision of the Tom Lantos Block Burmese JADE Act against Myanmar on January 15. The Act froze the finances of all parties supporting Myanmar’s government and made provisions for sanctions against those who choose to do so in the future.
President Bush’s waiver, however, released the identities of those unnamed and/or future supporters, thereby limiting sanctions to supporters already identified on the U.S. Treasury Department’s list of blocked persons. Representative Howard Berman (Democrat-California), chairman of the House Committee on Foreign Affairs, disagreed with this change, explaining, “Now those who are supporting the Burmese military clique and who have not yet been publicly identified by the Treasury Department will get a free pass — just what Congress was trying to prevent.”
De Beers Cuts Jobs and Spending
De Beers spokespersons confirmed that the company plans to reduce the workforce at its South African mines and its corporate headquarters in London. Lynette Gould, De Beers spokesperson, could not comment on how many employees would be affected by the cuts.
De Beers revised its mining plans for the year and froze all nonessential capital expenditures. Gould said that it was still too early to say at what percentage of full production De Beers would be operating its mines through the first half of 2009, adding that production would be in line with demand from Diamond Trading Company (DTC) sightholders.
In other company news, De Beers and ALROSA officially ended their trade relationship in accordance with commitments made to the European Commission (EC) in 2006. The EC stated at the time that the arrangement would “result in more rough diamonds being available on the open market, paving the way for genuine competition.”
However, ALROSA can still legally sell rough diamonds to De Beers, as the European Court of First Instance annulled the decision to ban trade between the two companies in July 2007 after ALROSA successfully argued that it had not been consulted about the EC ruling. The EC has since appealed the court decision and awaits a hearing on the matter.
— Additional reporting by Dialog NewsEdge.
DTC Sight Valued at Under $100 Million
De Beers sales unit, the Diamond Trading Company (DTC), held one of its smallest sights in company history, closing with an estimated value of between $80 million and $100 million. While similar to the value of its December sight, this total comprises one-sixth the estimated value of the January 2008 sight.
For this sight, DTC changed the way it offered goods to each sightholder, presenting the rough diamonds in one box rather than separating them into different boxes by category. “This gave sightholders a bit more flexibility in their decisions to reject goods or not,” explained Louise Prior, DTC spokesperson.
Sightholders noted, however, that the move also allowed DTC to change its invoicing practice by giving only a “one-line invoice” on the box, rather than listing individual prices for the different types of goods presented. Some were critical of the change, saying that it reduced transparency, while others complained that it enabled DTC to keep prices at higher levels. For this reason, observers were hesitant to give feedback on any price movements. They did, however, report some improvement in the assortment of goods.
In an effort to reduce existing inventories, Varda Shine, managing director of DTC, informed sightholders that the DTC is exploring options for bringing surplus goods to the market once every avenue of sightholder demand has been satisfied.
JA NY Winter Show Suffers Freeze
“My worst show in 25 years.” “It’s never been like this before.” These were just a couple of comments from exhibitors at the three-day Jewelers of America (JA) New York Winter Show that ended its run on January 20. Still, few were surprised, as it was well known that retailers had a less-than-stellar Christmas.
Exhibitors agreed that this event has contracted in size and is now regarded by many as a small regional show rather than a major national event. Most notably, the composition of the show has changed. There were exhibitors offering closeouts on practically every aisle, a dearth of branded jewelry and watch collections and the curious addition of vendors selling fur coats, rugs, gifts and fashion accessories.
But the main issue was slow traffic. Buyers came by to say hello to major accounts and placed minimal orders, if any, heavily skewed toward the classics and price-point items. The best-selling categories included three-stone rings, engagement rings with cushion, radiant and princess cut center stones accented with micropavé and price-point items, such as diamond-accented pendants and bridal sets.
Vicenza
First Highlights Jewelry Trends for 2009
The second edition of Vicenza First, held from January 11, 2009 through January 16, 2009, confirmed the impact of the economic crisis on the jewelry trade. Though this year’s show featured more exhibitors, the number of visitors fell 30 percent compared to last year.
Two sectors in particular characterized the show, one being “Glamroom,” which featured 25 companies providing a preview of prêt à porter jewelry and easy-to-wear accessories that were a combination of traditional precious materials and alternative elements, such as wood, glass, ceramics and steel. “T-Gold,” the second sector of note, was a machinery exhibition featuring 80 companies.
The diverse collection also revealed trends to watch for in 2009. Yellow and pink gold will be popular this year and were celebrated in an exhibition called “Gold Expressions 2009.” One of this exhibition’s most popular collections was designed by Vendorafa and utilized fret-worked pink gold, leopard-print motifs and small diamond embellishments. Medium- to high-level white gold and platinum were also widely displayed; a stunning cross pendant covered with white diamonds was a best-seller at the Recarlo exhibition.
A Not So Merry Christmas
ShopperTrak reported that overall 2008 holiday sales fell 2.3 percent from last year, while foot traffic decreased 16 percent, based on its retail traffic index (SRTI), which monitors 50,000 retail and enclosed mall locations throughout the U.S. The decline came despite a 21.2 percent rise in retail sales during Christmas week, or from December 21 to 27, compared with the same week of 2007. Bill Martin, cofounder of ShopperTrak, explained that improved traffic and sales during Christmas week actually indicated that shoppers were focusing on stores offering significant value for the dollar via price cuts.
Signet Jewelers reported that its total sales in the U.S. fell 14 percent, while same-store sales decreased 16.4 percent. The jeweler’s average selling price dropped at both its Jared and Signet’s mall-brand stores. Zale Corporation’s November and December sales fell 19.6 percent from last year to $582 million and its comparable or same-store sales declined 13 percent in November and 22 percent in December. “This holiday period was the most difficult in memory due to the overall macroeconomic situation,” Neil Goldberg, Zale’s chief executive officer (CEO), remarked. Zale reported that its end-of-year inventories were approximately $115 million less than in 2007.
Finlay Enterprises stated that its sales for November and December 2008 combined slumped 23.7 percent to $265.9 million, while its comparable store sales decreased 20.8 percent. Finlay’s specialty jewelry stores — Carlyle, Congress and Bailey Banks & Biddle — contributed sales of $88.1 million for the two-month period, compared with sales of $130.2 million in 2007.
Tiffany & Co. reported that its sales in the Americas declined 30 percent to $385.9 million, led by a 35 percent drop in comparable store sales across the U.S. There was a similar sales decline at the company’s flagship New York store; the drop in tourism to New York since the record year of 2006 may have impacted these sales. The number of foreign visitors in the fourth quarter of 2008 fell 5.1 percent to 10.2 million, according to estimates provided by the Manhattan Institute.
Luxury retailer Saks Incorporated listed jewelry among the categories that showed relative strength in December at Saks Fifth Avenue, but reported that its sales declined 18.9 percent to $363.3 million for the month. Saks’ comparable store sales dropped 19.8 percent.
Nordstrom’s sales decreased 8 percent to $1.1 billion, while its same-store sales fell 10.6 percent. Macy’s total sales for the five weeks ended January 3, 2009 declined 4.7 percent to $4.6 billion, while its same-store sales dropped 4 percent. The retailer reported that same-store sales for November and December combined were down 7.5 percent, even after factoring in online sales, which rose 26 percent. Macy’s also announced that it will close 11 underperforming stores.
Online holiday sales fell below expectations, as well. Research company comScore noted that sales between November 1 and December 23, 2008 declined 3 percent to $25.5 billion, despite a 5 percent rise in traffic in December when 180 million unique visitors viewed retail sites. Amazon, which reported its best season ever, saw traffic increase 7 percent to 76.2 million unique visitors, while traffic to Apple’s site climbed 19 percent. Many of the ten busiest sites saw declines in traffic, however, including eBay, the number one site in terms of unique viewers, which was down 4 percent, and JCPenney, which was down 11 percent. The 2008 holiday season marked the first full quarter with negative online sales growth since tracking began in 2001.
Martin of ShopperTrak advised, “Looking ahead, retailers will most likely need to get creative to avoid the struggles most analysts have predicted as the current economy continues to influence consumer behavior and shopping patterns.”
Article from the Rapaport Magazine - February 2009. To subscribe click here.