The Diamond Trading Co. (DTC) reported it would release a “special allocation” of marketing funds to help boost U.S. holiday sales of diamond jewelry for a select group of sightholders.
According to DTC spokeswoman Louise Prior, there was a request from sightholders for more marketing support for their retailers during the fourth quarter this year.
“These financial contributions will help support marketing initiatives with the sightholders’ chosen downstream partners to grow consumer demand for diamond jewelry during the last quarter of this year,” Prior said.
She pointed out that the funds are not part of any kind of generic marketing campaign for diamonds.
According to reports, the DTC has cut back on generic diamond advertising because diamond giant De Beers no longer controls the majority of the world’s supply of diamonds.
Prior would not release the names of the sightholders who received the extra marketing funds.
The upcoming holiday season at Tiffany & Co could be the beginning of renewed growth at its established U.S. stores. This was told Reuters by its chief executive.
Despite moderating sales expectations in the U.S. market, Tiffany said it hopes for a “modest increase” in fourth-quarter same-store sales.
“That, perhaps, is the beginning of a return to greater consumer confidence that would build throughout 2009,” Chief Executive Michael Kowalski said in an interview after the company reported “better-than-expected” quarterly earnings.
Tiffany’s shares jumped nearly 11 percent.
“Part of our optimism is driven by favorable year-over-year comparisons,” Kowalski explained. “I think probably more important is that we are very optimistic and confident in the new product lineup we have.”
In his opinion, the U.S. market was still the most cautious, with shoppers concerned about the economy. Aspirational consumers - those who buy under $500 - were under the most pressure.
The company has also seen soft sales of jewelry priced above $50,000 - a sign that its most affluent customers are also discriminating in spending.
Tiffany aims to entice customers within those extremes. For example, its new products will include pricier variations of its widely popular charms – in gold and platinum, not silver this time.
The company may need to watch if bankrupt jewelers (Whitehall Jewelers and Friedman’s Inc) sell their wares below market price.
“The aspirational customer is under some pressure,” Kowalski said. “We have seen that in sales below $500, so that is something we need to be wary of. We cannot identify it as happening today, but it is a fair concern.”
Kowalski brushed away concerns about a slowdown in international markets.
“Internationally, we have wonderful market share opportunities. Those opportunities are strong enough for us to overcome any economic headwinds,” he said.
For the full year, Tiffany forecast a same-store sales increase above 12 percent in Asia-Pacific stores (except Japan) and more than 10-percent growth in Europe (on a constant currency basis).
Tiffany uses higher-quality diamonds in its jewelry, which are always in short supply, Kowalski explained, adding that he expects the situation to continue for the foreseeable future. Besides other commodities like platinum and silver, labor makes up a significant part of costs for Tiffany.
Other jewelers like Zale have said they do not face a material impact from higher diamond prices since they don’t seek higher-quality diamonds, which are pricier and often tough to procure.
A target of 150 to 170 stores in the United States in the long term, including smaller-format units, is “doable,” Kowalski said, adding that Tiffany may reassess that number in five years. The company has about 75 in the U.S.
Zale Corp. plans to sparkle this holiday season, literally.
Last Christmas, half the stores didn’t have lights in the jewelry cases. No one budgeted for store decorations, and cases were still cluttered with goods. Stores carried 85 varieties of diamond stud earrings but were often out of the most popular items.
Morale was low after consecutive years of disappointing results, and earnings fell again, by a third, in the quarter in which Zale historically makes almost all its profit.
Zale chief executive Neal Goldberg, who signed on four days before Christmas as the chain’s third CEO in three years, now predicts a merrier holiday outcome 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 be in the range of negative 1 percent to flat.
Mr. Goldberg said the company’s Canadian stores are performing better than its U.S. stores, but Zale plans to regain domestic market share as weaker 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 year ago. Excluding items, the loss was 48 cents a share, below the point analysts expected (57 cents).
Fourth-quarter sales rose 6.1 percent to $456 million from $430 million. Zale completed the sale of about $100 million in clearance merchandise and launched an emotional “Mom Rocks” advertising campaign for Mother’s Day that it plans to build on for the holidays.
Last Christmas, sales fell 7.3 percent, and that easy comparison is only part of the reason Mr. Goldberg believes Zale is positioned to do better.
“How can you sell diamonds without lights in the cases?” Mr. Goldberg asked while showing off new LED lighting in a mock store set up inside the company’s Irving headquarters (Texas).
Stores are getting holiday decorations, and all display cases will have lighting. That diamond stud collection is down to 46 styles and will be in stock. Fashion jewelry, including beads and metals, has been added to the mix.
About 400 company and store staffers were recently brought to town for a four-day corporate meeting.
Mr. Goldberg said the executive ranks are spending more time in the stores. In this way they develop a culture of respect for the field. All the more so, because “the answers are there.”
