Retail Bulletin

RAPAPORT... GDP Declines
Real gross domestic product (GDP) in the U.S. contracted by 6.2 percent in the fourth quarter of 2008. This annualized quarterly drop was the steepest since the first fiscal quarter of 1982 and lower than Commerce Department predictions of 3.8 percent.

Consumer spending, which accounts for nearly 70 percent of the GDP, fell 4.3 percent during the quarter, the biggest drop since the second quarter of 1980, according to the Commerce Department. Total retail sales in the fourth quarter, adjusted for seasonal variations but not price changes, fell almost 8 percent to $938.1 billion and ecommerce sales were down nearly 6 percent to $31.9 billion.

Seasonally adjusted total retail sales fell 0.6 percent to more than $4 trillion, while ecommerce sales rose almost 5 percent for the year to $133.7 billion. The U.S. economy grew only 1.1 percent in 2008, following a 2 percent increase in 2007.

U.S. Jewelry CPI Jumps
The U.S. consumer price index (CPI) for jewelry rose 3.6 percent year-over-year during the month of February to 155.69 points, according to statistics provided by the Bureau of Labor Statistics (BLS). February’s CPI was two points higher than January’s and represents the 13th consecutive monthly reading over 150 points. Prior to this run, the index had not hit 150 points since February 1998.

For the watch and jewelry categories combined, the index for February increased 3.7 percent to 147.91 points, which is 2.3 points higher than January’s reading. The monthly CPI is based upon the reference point of average prices in 1986, which is set at 100 points.

February Retail Sales Beat Expectations
Retail industry sales increased 0.6 percent in February when seasonally adjusted, compared with January, and decreased 5 percent when unadjusted, according to the National Retail Federation (NRF). The figure — which excludes automobiles, gas stations and restaurants — represents the second consecutive month that retail sales surpassed analysts’ expectations, the trade association reported.

Total retail sales — which include categories such as automobiles, gas stations and restaurants — decreased 0.1 percent when seasonally adjusted and compared month-to-month.

Zale Reports Loss, Plans to Close 115 Stores
Zale posted a loss of $23.6 million, or a 74-cent loss per share, in the second fiscal quarter that ended January 31, 2009, compared with profits of $61 million in the previous year. Zale Corporation’s revenues fell 18 percent to $679.4 million and same-store sales declined 18 percent during the period. Zale spokespersons said that they expect the company to save $34 million through fiscal 2010 from the closure of approximately 115 underperforming stores.

Tiffany’s Profits Plunge
Tiffany & Co.’s profits declined 76 percent compared to the previous year to $31.1 million for the three months that ended January 31, 2009, the luxury jeweler reported. The firm took a one-time pretax charge of $97.8 million for an early retirement program and other staffing reductions. There was also a $7.5 million pretax charge related to the anticipated closing of Tiffany’s Iridesse retail operations, charges of $12.4 million to write off an investment in the Jericho mine in Canada, and a pretax charge of $3.4 million to close its diamond polishing facility in Yellowknife, Canada.

The company’s full-year fiscal profits decreased 32 percent to $220 million and sales were down 3 percent to $2.9 billion. In its report, Tiffany projected that rough diamond prices will fall an additional 20 percent during the year.

Signet Records Fourth-Quarter Loss
Signet Jewelers posted a net loss of $424 million for its fourth fiscal quarter, which ended January 31, 2009, compared with net profits of $143 million one year ago. U.S. sales at the company’s Kay Jewelers and Jared The Galleria of Jewelry locations declined 14 percent to $862.1 million during the quarter. U.S. business had an operating loss of $327.1 million, compared with profits of $122.7 million in the fourth quarter of 2008.

For full fiscal-year 2009, Signet posted a net loss of $393.7 million, compared with net profits of $219.8 million in 2008. Excluding goodwill impairment, relisting costs and taxes, the company’s full-year profits were $200.9 million. Sales for the year were down 9 percent to $3.3 billion, a decrease of 6 percent at constant exchange rates, which disregard the effect of currency fluctuations. Overall same-store sales fell 8 percent, while same-store sales in the U.S. declined by 10 percent for the year.

Sales performance in the U.S. “was primarily driven by the difficult economic conditions,” Signet explained in its report, particularly following “the sharp deterioration in consumer sentiment in mid-September.”
In light of this fourth-quarter performance, Signet announced a plan to reduce U.S. expenses by $100 million in fiscal 2010 by reducing staff hours at its stores and eliminating about 100 jobs.

Birks & Mayors Declares Net Loss
Retailer Birks & Mayors’ financial results revealed a net loss of $42.7 million in its third quarter of fiscal year 2009, which ended December 27, 2008, compared with profits of $12.7 million one year earlier. The company’s net sales fell 28 percent to $88.1 million and comparable store sales for the period decreased 23 percent.

For the three fiscal quarters to date, Birks & Mayors posted a net loss of $46.6 million, down from profits of $7.2 million one year earlier. Net sales declined 12 percent to $221.7 million and same-store sales fell 14 percent.

De Beers Diamond Jewellers’ Sales Up
Revenues at De Beers Diamond Jewellers grew 6 percent in 2008, according to its annual report, which also noted that bridal sales were “particularly resilient” throughout the period, increasing 46 percent in December and 51 percent for the full year.

The report added that introducing the Forevermark line of bridal jewelry to Japan and Europe in 2008, following its U.S. launch, contributed to the strong performance. The company did not provide total sales figures in the report.

Sotheby’s In the Red
Sotheby’s reported an operating loss of $696,000 for the fourth quarter that ended December 31, 2008, compared with profits of almost $142 million one year ago. The auction house’s net loss was $8.5 million, compared with a net income of $102.4 million a year ago, and revenues fell 52 percent to $166.2 million. Sotheby’s took on a restructuring expense of $4.3 million related to headcount reductions in North America during the quarter. For the full year, revenues decreased 25 percent to $691.6 million, operating income sank 73 percent to $74.4 million and net income slumped 87 percent to $28.3 million.

Bulgari’s Profits Tumble
Bulgari Group’s net profits dropped 45 percent to $106 million (EUR 82.9 million) in 2008, while revenues fell 2 percent to $1.4 billion (EUR 1.1 billion), according to the company’s 2008 financial statement. Revenues by category included a 3 percent decline for jewelry to $573 million (EUR 448 million) and an 11 percent decrease in watch sales to $338 million (EUR 264 million).
Sales in the Americas fell 13 percent and European sales were down 1 percent, but sales were up 2 percent across Asia and jumped 9 percent in the Middle East. Bulgari’s statement explained that the firm increased prices, particularly for jewels and watches, after precious metals prices reached record highs early in 2008. Even though the prices of raw materials softened during the year, Bulgari held firm on its prices.

Article from the Rapaport Magazine - April 2009. To subscribe click here.