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U.S. Economy, Strength in Numbers
Despite nagging high unemployment and other negative influencers, American consumers are still shopping. Last year, one of the benefactors of their spending was the U.S. jewelry industry, which posted solid sales gains versus total retail sales gains for all categories. U.S. jewelry and watch sales combined set a record high in 2011 of $68.3 billion, showing 11 percent growth over last year, based on preliminary data from the U.S. government.
By: Diamond World News Service
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Jun 18 2012 1:52PM
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Reference: 7028  

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The U.S. jewelry market realized a double-digit increase for the first time since the mid-1980s, when the trade posted several years of sales growth in the low-to-mid teen range. The gain, however, is due in part to the high cost of precious metals and polished diamonds.

“Retail jewelry prices were up about 8.4 percent during the year, so ‘real’ jewelry sales rose by only 2.6 percent,” explains Ken Gassman, market analyst based in Richmond, Virginia.

Overall, Gassman says the recession has had only a modest impact on retail jewelry sales, despite many jewelers claiming hardship. “From 2007 through 2009, jewelry and watch sales dropped by only 11 percent in the U.S. market before posting a solid recovery in 2010 and 2011.” He notes that 2011 represented a return to 2007 levels or better.

The U.S. jewelry trade came into 2012 after solid holiday sales, with average retail sales up 4.2 percent in December over the previous year. Nordstrom, Saks and Macy’s were among the top sellers, up 3.5 percent to 6.2 percent. Online sales were exceptionally good, up 15 percent, according to ComScore, digital market research firm in Reston, Virginia. The Internet is now the second favorite mode for Americans to spend holiday dollars, displacing department stores and following Big Box locations, reports the CNBC All-America Economic Survey.

For the first quarter of this year, Gassman describes jewelry retailers showing mixed sales results, with an average 4.3 percent growth across retail channels. While Zale showed a nearly 11 percent gain for US jewelry stores, after several years of losses, others retailers realized more modest gains: Tiffany 3 percent, Blue Nile 2.5 percent, and Sterling 1.8 percent for U.S. jewelry sales.

Zale CEO Theo Killion attributes the retailer’s improving numbers to discipline and focus. “Even with the challenges in the North American economy and pressure from commodity cost increases, we continue to build business momentum,” he reports. “Our sales results were primarily driven by initiatives including improved core inventory and alternative credit program in the United States, a new marketing campaign, and integrated online and traditional store infrastructure, and strong execution by our customer-facing teams.”

Sales outlooks from Tiffany and Signet Jewelers suggest global economic worries are weighing on luxury spending in jewelry, echoing sentiment from other retailing segments. Tiffany cites slowing economic growth in many countries and softness in its U.S. operations, most notably a 4 percent drop at its N.Y. flagship store that relies heavily on foreign consumers, especially Europeans.

Factors impacting Tiffany sales in the Americas include restrained spending by customers employed in the financial sector and substantial competitive discounting, which Mark Aaron, vice president of investor relations, says has continued to particular softness in entry-level silver jewelry price points tied to resistance to price increases.

Gassman is not prepared to declare that high-end luxury jewelry demand is headed for long-term or even short-term trouble. “I've been reading the blogs, and it’s clear that no one really has the full story. There's more to this than we know. We've got to wait this one out.”

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