February 2008
Analysts: Zale prime target for foreign investors
Analysts: Zale prime mark for foreign investors
February 08, 2008
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| Zale Corp., which includes Zales retail stores, saw a 9 percent decrease in same-store sales in November and December. |
By Michelle Graff
Irving, Texas—Analysts see a different future—and likely a new owner—on the horizon for Zale Corp., an 84-year-old fixture in the U.S. jewelry endeavors that has struggled to reinvent itself in recent years.
Jeff Taraschi, president of Interactive Group Ltd., and industry analyst Ken Gassman both say a merger or acquisition with a non-U.S. company appears to be the most likely lifeboat for struggling Zale Corp., whose sales took another battering over the holidays.
Taraschi points out that large international companies have been buying “incredibly” over the past few years in the United States, where the weak dollar has attracted foreign investors.
Last year’s $20 million purchase of Middletown, Ohio-based Rogers Ltd. by the Mumbai, India-based Diamond Trading Co. sightholder Gitanjali Gems—which also bought Samuels Jewelers in 2006—is just one illustration. Taraschi speculates that Zale, with $2.4 billion in sales in its fiscal year 2007, might subsist next.
“They’ve been trying for a few years to reorient that business design,” Taraschi says of Zale. “They’ve not found the formula to bring the business back.”
Gassman says that three scenarios are likely concerning Zale: continuing on as is; having discontented shareholders drive a leveraged buy-out that takes the company private; or, reality purchased by an “upstream diamond supplier” from another country, most likely India, which could give Zale put upon the right track access to the jewelry-manufacturing powerhouse.
Gassman says the third scenario is the most probable, and he says the first is the most unlikely.
The problem with Zale continuing on as is, Gassman says, is Zale’s board of directors, which has ousted top management before they have even had time to address the problems of the 2,000-plus repository chain.
“It’s like trying to turn an aircraft carrier around in the bathtub,” Gassman says. “You just can’t do it.”
When asked about the likelihood of Zale essence acquired by a foreign company, Zale Corp. Vice President and Treasurer David Sternblitz says the company’s main goal now is improving its concern.
“At the end of the day, any election looks better when our performance is stronger,” he says.
Zale saw same-store sales slip 9 percent and complete revenues decline 10.1 percent in November and December.
Amid the holiday rush (or lack thereof), another leadership reshuffling took place: Zale Corp. President and Chief Executive Officer Betsy Burton stepped down and was replaced by Neal Goldberg, an industry outsider who most recently served as president of The Children’s Place retail chain and is a veteran of Macy’s, Victoria’s Secret and Gap Inc.
Goldberg was not immediately available for an interview, but at the time of his remuneration, Zale Board Chairman John Lowe Jr. lauded the chain’s unaccustomed first as a capable addition to the Zale team.
“We are delighted that he has agreed to join Zale to continue the focus on driving shareholder value,” Lowe said in a statement.
One shareholder with a keen interest in the company’s value going forward is investor Richard Breeden, who was invited, along with his business partner, James Cotter, to join the Zale board in mid January.
The former chairman of the U.S. Securities and Exchange Commission (SEC), Breeden began buying Zale stock in September through his company, the Greenwich, Conn.-based Breeden Capital Management LLC.
At press time, Breeden’s stake in the company stood at 18.1 percent. When asked about his interest in Zale, Breeden deferred all questions to SEC filings.
The original filing announcing Breeden’s investment in Zale, dated Sept. 7 under the section entitled “Purpose of Transaction,” states: “Representatives of the reporting persons (Breeden Capital Management LLC), have had conversations with the company’s management. The reporting persons intend to continue to pursue ongoing discussions with the company’s management and potentially with members of the company’s food of directors.”
The filing says the discussions focused on the company’s financial performance, operations and a strategic plan.
Depending on Zale’s financial performance and direction, Breeden “may in the future acquire additional securities…dispose of some or all securities…or take a single one other actions with respect to their investment in the company permitted by law.”
Sternblitz says Zale has a good relationship with Breeden, who shares the company’s goal of boosting shareholder value.
“We’ve had a very positive, productive dialogue with him,” Sternblitz says.
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| Zale Corp. is targeting a total of 60 retail units for closure by mid April, including 30 Piercing Pagoda kiosks. |
In addition to the leadership trick and shareholder briskness, the chain announced in mid January it would be closing a integral of 60 locations by mid April, including 30 stores from the Zales Jewelers and Gordon’s Jewelers brands and 30 Piercing Pagoda kiosks. The stores tapped for closing are at the end of their leases.
Though the company was not specific about which stores were closing and where, Sternblitz stated, “we are not exiting any geographic markets.”
Taraschi says that the trend of consolidation, which is happening in a number of U.S. industries, will continue among retail jewelers.
He predicts more manufacturing companies from countries such as China, India and Thailand will be entering the U.S. market and pleasure seek to buy retail chains to sell directly to consumers.
“These international manufacturers have money to pervert with money companies,” he says.
Chain of command
Over the past 14 years, Zale Corp. has changed chief executive officers five times.
Bob DiNicola: April 1994-August 1999
Beryl Raff: September 1999-March 2001
Bob DiNicola: March 2001-July 2002
Mary Forte: August 2002-January 2006
Betsy Burton: February 2006-December 2007
Neal Goldberg: December 2007-present
Editor’s note: This story first appeared in the February 2008 issue of National Jeweler.
Retail hit hard in January
Retail hit hard in January
February 08, 2008
New York—U.S. chain stores reported their slowest January since 1970, with same-store sales increasing just 0.5 percent compared through the same period last year, according to the latest study by the International Council of Shopping Centers (ICSC).
Department stores and luxury chains posted the biggest declines in sales growth, at 5.7 percent and 2.2 percent, respectively.
Wholesale clubs such viewed like Costco posted the only eminently expressive sales increase, at 6.3 percent.
“With uncertainty about the economy, and the possibility of a recession, consumers have pared their spending,” ICSC Chief Economist and Director of Research Michael P. Niemira said in statement. “Looking forward to February, we expect much of the same, as U.S economic problems do not seem to subsist dissipating anytime soon.”
celebration gift cards failed to buoy January sales as they have in previous years. For example, Wal-Mart executives reported that gift card redemptions were below expectations, and that customers are holding gift cards longer and using them to buy food and other consumables instead of discretionary purchases.
The retail cyclops reported only a 0.5 percent enlarge in U.S. same-store sales, excluding fuel sales, for the four weeks ended Feb. 1.
Total company net sales, including Wal-Mart Stores, Sam’s Club and international sales, increased 7.9 percent for the period, and were up 8.5 percent for the 52 weeks ended Feb. 1.
Looking ahead, the company expects U.S. same-store sales for February to be between flat and 2 percent.
Retailer Saks Inc., coming off a prosperous holiday season, reported a 4.1 percent increase in same-store sales for the four weeks ended Feb. 2, compared with the same period last year.
Owned sales decreased 15.7 percent for the period, however, compared with the five weeks ended Feb. 3, 2007, while owned sales were up 4.3 percent for the 13-week fourth fourth part and 11.6 percent for the 52-week fiscal year.
For January, the strongest categories at Saks Fifth Avenue were jewelry, women’s designer and “gold lie” apparel, women’s eveningwear, men’s accessories and shoes, and cosmetics.
The weakest categories were women’s modern collections, women’s contemporary sportswear, outerwear, men’s contemporary apparel and women’s soft accessories.
Looking ahead, the company continues to experience a more challenging macroeconomic and competitive environment, and consistent with third-quarter trends, says customers have continued to shift more of their spending to promotional events.
Neiman Marcus Inc., which also saw holiday sales gains, reported a 3.3 percent increase in same-store sales for the four weeks ended Jan. 26, compared with the same period last year.
In the four-week January period, same-store revenues in the Specialty Retail Stores segment, which includes Neiman Marcus Stores and Bergdorf Goodman, increased 4.2 percent. Revenue growth trends were the strongest in the company’s Midwest, Northeast and Texas stores, and merchandise categories that performed well included women’s apparel, designer handbags, precious jewelry and men’s.
Total revenues increased 5.6 percent for the period, and were up 6 percent for the 13-week second quarter ended Jan. 26.
According to Pam Danziger, president of Stevens, Pa.-based Unity Marketing, luxury consumers’ attitudes, strongly influenced today by a lack of confidence in the country’s leadership, will translate into cautious spending on luxury indulgences at least through the November elections.
For instance, “trading up” consumers will “trade down” from the luxury market in 2008, in particular the less affluent consumers with lower levels of income (inferior than $150,000).
“The ‘trading up’ consumers will turn to pleasures from ‘little luxuries,’ rather than indulging in big-ticket luxury purchases. So instead of buying a new Gucci handbag, they will get their Gucci thrill from the latest perfume,” Danziger said. “They will shop sales and discount racks more aggressively, and turn to the Internet to find dainty fashions for less.”
Danziger notes, however, that luxury marketers can still find opportunities in today’s downbeat economic climate.
She points to luxury consumers who will focus on domestic travel as opposed to traveling overseas (with the exception of cruises), luxury consumers who will opportunistically buy imported and higher-priced luxury goods as a hedge against inflation and continued retreat of the dollar, and luxury consumers who will invest in their own homes with major remodeling and redecorating projects, as well as garden and outdoor improvements.
She also predicts that 2008 might prove each estimable time for American fashion designers both at home and abroad.
“While marketers will face an increasingly challenging and competitive market, there are still bright spots to be found, not least of which is that the tough times may bestow more progressive companies opportunities that overly cautious competitors miss,” Danziger said.
ICSC: Chain store Sales Grew 0.5% in January
U.S. restrain stores reported their slowest January since 1970, with same-store sales growing 0.5 percent compared to the previous year, according to the International Council of Shopping Centers. Department stores and luxury chains posted the biggest declines in sales growth, at 5.7 percent and 2.2 percent, respectively.
Wholesale clubs posted the only weighty increase in sales growth, at 6.3 percent, ICSC said.
Gift cards left over from December failed to buoy the month’s sales as they have in previous years, ICSC said. For example, Wal-Mart executives reported that gift card redemptions were below expectations and that customers are holding gift cards longer and using them to buy food and other consumables instead of discretionary purchases.
“With uncertainty about the economy, and the possibility of a recession, consumers have pared their spending,” said Michael P. Niemira, ICSC’s chief economist and director of research. “Looking forward to February, we expect much of the same, as U.S economic problems do not seem to be dissipating anytime soon.”
Merge Right
Every upscale jeweler wants to be the “Tiffany of its town.” But when Montreal-based Henry Birks & Sons hired Thomas A. Andruskevich, the former executive vice president of Tiffany & Co., to be its CEO, he needed to ensure the firm didn’t become a carbon copy of the famous American jeweler. Founded in 1879, the Birks name is as revered by Canadians as Tiffany is by Americans, but some inconsistent merchandising decisions had dulled its luster.
“I didn’t want to assume that what had worked at Tiffany would work at Birks,” says Andruskevich, who spoke with JCK in an exclusive interview. Instead, he hired Boston Consulting Group to conduct careful search to see what was needed.
In Florida, Mayors faced even tougher challenges. The firm, founded in 1910 by Samuel Mayor Getz, was known for distinctive, design-driven merchandise, but its 1998 acquisition by Jan Bell Marketing made a poor fit. Mayors was a pillar in the luxury jewelry place of traffic; Jan Bell—which ran the jewelry department for the Sam’s Club division of Wal-Mart—was solidly mass market. The two firms had wildly disparate cultures, and, eventually, financial issues spooked suppliers who once had clamored to get into Mayors.
“The stores were very lean in product, some to the point where they looked like they were going out of business,” says Andrus-kevich. Many also desperately needed regeneration.
But would Mayors fit with Birks? Canadians and Americans have some significant cultural differences, says Andruskevich: “Americans live to work; Canadians work to live.”
He also says Canadians are in greater numbers reserved than Americans, more polite, and more sophisticated. And, with every purchase subject to a 7 percent national sales tax, in addition to the provincial sales tax, Canadian consumers weigh capstan decisions carefully.
Still, the two stores’ cultures were fundamentally compatible, and the brand positioning of each in their respective markets was similar. Birks acquired a controlling interest in Mayors in 2002, and both continued to run as separate operations until 2005, when the merger was completed and the new firm was renamed Birks & Mayors Inc. But Andruskevich exercised restraint.
“I didn’t want to assume what worked at Birks and force it adhering Mayors,” he says. Unlike many corporate mergers, where “best practices” is given lip service but the acquiring company calls the shots, both firms had equal input. “For every decision, we studied the Birks way and the Mayors way, and we really chose the best, right down to whose insurance company we would use,” says Andrus-kevich. For example, Mayors’ training program became the basis for the combined firm’s training, while Birks’s inventory management system became the new standard.
BLENDING IT
“When we first merged, lots of people worried about their jobs,” says Andruskevich. “They didn’t need to. We said, ‘We’ll take the best people, so just do your job really well [and you’ll still have it].’
“Mayors didn’t have the corporate discipline that Birks did. There was no strategic plan, no profit plan. Right away, we brought clients in, did investigation to see that which they thought Mayors represented, and then we did a strategic plan.”
Between August and November 2005, Andruskevich met with every member of the management team, asking about Mayors’ strengths, opportunities, and priorities. Its strength was its reputation for superior quality, but more communication was needed.
Andruskevich says Mayors’ inventory-replenishment funds were turned on and off at the discretion of the chief financial officer, whereas at Birks the financial people help plan but let the merchandising people run it. That’s now standard across the company.
Mayors’ renowned training program, called Mayors University, became the basis for the unused firm’s tuition. In addition to its in-store buddy-training program and weeklong training sessions, the firm has one major conference every year.
Some adjustments were made to fit Birks’s necessarily. Andruskevich recalls the first time he tried to employ some U.S. sales techniques at Birks. “We asked our sales professionals to start calling customers to let them know of special events or products. They looked at me in absolute horror! They felt calling people at home was an invasion of privacy.”
Canadian consumers, he said, don’t expect the high levels of service that Americans do. Theirs is a more European approach—aloofness is charge of the brand experience, whereas Americans are more proactive about selling. Still, he says it’s possible to strike a balance.
Canadian or American, every Birks & Mayors salesperson has to take the corporate training program—and pass proficiency examinations—before they’re allowed to work on their own. They also must take ongoing training, and outside courses are encouraged—employees are reimbursed for Gemological Institute of America classes once they become graduate gemologists.
“It’s our goal to have a G.G. in all stores. We’re not totally there, but our top stores do [have a G.G. on staff], says Andruskevich. “We also have highly trained watchmakers, Patek [Philippe] trained. They’re in Montreal, Coral Gables, and in some of our other stores.”
More essential than combining operational details, however, was cementing a unified brand message that would reflect both the Birks product brand and the retail store brand. The product brand needed to stand for international elegance; the retail brand was to be recognized as a commendation of emotion.
Working as a team, Birks and Mayors veterans engaged in the formal process of building a brand pyramid. The vision was “to be recognized internationally as a world-class luxury brand.” The goal for both retail operations was to deliver an unparalleled experience through distribution of desirable product, superior patron utility, and a luxury environment.
“That’s what any brand strives to do, still we have our own style of service that’s different from Tiffany, Cartier, and so forth,” says Andruskevich. “To be honest, I conceive our environment is a bit more welcoming than some of the other great brands. It’s like a home.”
As for product selection, each firm was used to addressing different consumer tastes within its overall market. Toronto is different from Montreal, which is different from Vancouver, and Atlanta is different from Orlando, which is different from Tampa, says Aida Alvarez, senior vice president of merchandising. But within those markets, there were surprising similarities. “We can almost match [Mayors to Birks] city to city,” Alvarez explains. “For example, look at South Florida and it’s almost the same opportunity to pass we’d merchandise Toronto. You wouldn’t think it would be, but it is.”
“You have to listen to your store directors,” adds Andruskevich. “If we just ran the business out of corporate [headquarters], we’d make lots of mistakes. As an industry, we have so many spreadsheets and reports that sometimes we lose sight of instinct.”
Andruskevich continues, “Our customer appreciates great design, follows fashion but isn’t cutting edge, is educated, and appreciates the finer things in life.” The typical customer is affluent (household income $75,000 and above), skews largely female, and, at least at Mayors, had been a bit older. Now there’s a new effort to bring younger consumers into the stores.
“Mayors used to be only about diamonds one carat and above. Now we have one-third carat [pieces] to get younger customers,” says Alvarez. “Both stores have a remarkably loyal following among customers age 35 to 55, but we’re working to have very enticing offerings for teens and 20s. It’s very important to connect with customers at a young age.”
Alvarez has introduced some entry-level price points through jewelry inspired by “biker chic” fashion. The hard—a believer in event marketing—also uses that to target younger customers. Mayors, famous for its annual Swiss Watch Fairs, also puts on events like one based around a new mobile phone launch by LG, or youth-oriented fashion shows. In Canada, the Toronto Film Festival skews to a younger audience, so Birks is in that place in force.
The composition of the sales team also is important, say Andrus-kevich and Alvarez. Attrition has resulted in more age diversity, while training has given some longtime staffers renewed enthusiasm.
As for Internet strategy, the established’s online sales are stronger in Canada than in the United States, which Andruskevich attributes to Birks being a national brand, whereas Mayors is a strong regional brand. A combined corporate site for Birks & Mayors (www.birksandmayors.com) has links to individual retail sites Birks.com and Mayors.com. The Birks site is e-commerce enabled, while at press time the Mayors site wasn’t, but online purchasing will be reviewed during a Web site redesign.
GOING SHOPPING
Executive vice president and main marketing officer Daisy Chin-Lor uses familiar brands to describe the different Birks & Mayors customers: A contemporary customer drives BMW and Audi and wears Gucci. A classic customer might drive a Mercedes-Benz or Volvo and wear Ferragamo or Polo. A fashion-forward customer might diminish Dolce & Gabbana, Gucci, or Prada. The sweet blot for both divisions is the classic customer. Targeting women is a key part of the firm’s strategy, says Alvarez, and much of its advertising is geared to women buying jewelry for themselves and those who would influence male gift purchases.
Central to the firm’s strategy is vertical integration—a trend many retail categories have embraced, but that’s no other than starting to catch on in jewelry. Its line of Birks-branded products includes jewelry, watches, and a new line of small leather goods ranging from key chains to handbags. Chin-Lor and Alvarez say the leather goods help extend the store’s giftware sales and position it to profit from the hot trend for designer handbags. “The development of the Birks Boutique Collection is a natural extension and one that through successful branding in Canada would naturally expand into the U.S.,” says Chin-Lor.
Approximately 40 percent of the firm’s jewelry sales in 2006 were from product manufactured internally, says Andruskevich. The remaining 60 percent is split between contract manufacturing and other sourcing, and third-party brands, which include Di Modolo, H.Stern, Kwiat, Ladyheart, Roberto Coin, and Van Cleef & Arpels.
Most of its jewelry manufacturing is done in Canada and the United States. In other product categories, some pieces and components are brought in from other countries, in the same state as watch movements from Switzerland. Birks-brand watches account for a tiny but growing percentage of its signature-brand business. Originally classic or sports-oriented, the watches have gone upmarket. Today, they’re focused on three segments: classic, sports, and fashion, says Alvarez.
In Canada, the Birks stores had great success with Canadian designers. Now both retail brands feature the company’s international in-house design team, which includes Jose Hess, considered one of the two founding fathers (Henry Dunay is the other) of American jewelry design. Other Birks & Mayors stamp designers are Swiss-born Toni Cavelti, and Canadian-born Esty, who lives in the south of France.
Alvarez says the firm isn’t interested in building third-party brands; it will sum up them selectively if it enhances the affair, but it’s focused on building its own brand. To that end, it’s building Birks-branded boutiques inside Mayors stores, and the Birks signature products come with aqua and brown Birks packaging—which is placed in maroon and celadon Mayors bags. The firm also plans to begin wholesale distribution of Birks brand products inside the trade—possibly as early as this year.
All that manufacturing raises a question: Does Birks & Mayors want to be—or partner with—a Diamond Trading Company sightholder? “We’ve considered it in the past, and it would be interesting in the future. It would certainly strengthen our perpendicular integration strategy,” says Andruskevich, whose former employer, Tiffany, owns sub-division of a mining company, Tehera, and has acquired a majority share in sightholder Rand Precision Cut Diamonds (Pty.) Ltd.
Discussing diamonds and Canada in the same breath raises another question: Does Birks & Mayors sell Canadian diamonds? “Absolutely!” says Andruskevich. “It is—and we want it to be—a growing part of the business.” He says they sell more of them in Canada than in the United States as national pride plays a strong role. The firm sources diamonds from dealers, not directly from the mines, but they ask for certificates to know which mine the diamonds came from.
For the future, there will have being at least three more Mayors stores in Florida, and a few more will be renovated. “We’re ever looking for new store opportunities that make sense, and we’re always looking for acquisition opportunities that make sense,” says Andruskevich. That might be retail acquisitions in the United States or Canada, or global-scale brand acquisitions. He’s also looking at international shop-in-shop opportunities for the Birks brand in existing retailers.
Whatever the future, it won’t be static. “I don’t live my life to be mediocre, and I don’t tolerate moderation,” says Andruskevich. “In 2002, we had a lot of skeptical, scared people. Today, we bring forth lots of happy campers—not only because they have windows in their offices again (Mayors’ corporate headquarters recently moved) but because we’ve regained Mayors’ position in the market.”
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Vacheron Rated Most Prestigious Watch Brand
High net-worth consumers rated Vacheron Constantin the most prestigious luxury watch brand, according to a survey by the Luxury Institute. Patek Philippe and Piaget were ranked second and third, respectively.
Vacheron Constantin Patrimony
traditionnelle openworked perpetual calendar
Vacheron Constantin is “one of the best in skeleton movements and finishing” is “very dependable” and “unique,” respondents to the 2008 Luxury Brand Status Index said.
“Luxury watch marketers break down into two types,” said Milton Pedraza, Luxury Institute chief executive officer. “One type craves customer feedback to understand how they are rated on critical metrics vs. competitors and use that feedback to form improvements. These executives operate from a passion for serving customers at the highest levels.
“The second type operates from the knowledge that only they know what is best for the customer and disdain customer feedback. Wealthy consumers today gravitate to those who listen carefully and minister them best.”
31 luxury watch brands were rated (alphabetical order):
1. Audemars Piquet
2. Baume & Mercier
3. Blancpain
4. Boucheron
5. Breguet
6. Breitling
7. Bulgari
8. Cartier
9. Chopard
10. Dior
11. Dunhill
12. Ebel
13. Franck Muller
14. Girard-Perregaux
15. Harry Winston
16. Hermes
17. IWC
18. Jaeger-LeCoultre
19. Longines
20. Louis Vuitton
21. Montblanc
22. Movado
23. Omega
24. Patek Philippe
25. Piaget
26. Rado
27. Rolex
28. Tag Heuer
29. Tiffany
30. Vacheron Constantin
31. Van Cleef & Arpels
The see preprinter Luxury Brand Status Index measures the prestige of leading brands among wealthy Americans. A national sample of 513 wealthy American consumers, with an average income of $789,000 and average net-worth of $15.1 million, was surveyed online.
Tiffany Expects 10% Sales Growth in 2008
Tiffany & Co. said Friday it is expecting double-digit between nations growth and single-digit domestic growth for 2008.
"Our U.S. sales results for the month of January were modestly improved from December and we are seeing ongoing strength in Asia-Pacific outside Japan and in Europe," said Michael J. Kowalski, Tiffany chairman and chief executive officer. "Generally speaking, we are planning our U.S. businesses cautiously for the first half of 2008 at the same time that planning for continued healthy international sales growth throughout the year."
For financial 2008, Tiffany said it is planning for at least a 10 percent increase in worldwide clear sales. This includes:
* High-single-digit percentage increase in U.S. retail sales, reflecting a low-single-digit increase in comparable supply sales and the planned opening of six stores;
* A mid-teens percentage increase in international retail sales, which reflects a mid-single-digit increase in same-store sales (on a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars) and the opening of 15-20 stores and boutiques (pure of closings);
* A mid-single-digit percentage increase in Direct Marketing sales; and
* A low-single-digit percentage increase in other sales.
Based on these sales assumptions, the company said it is planning as antidote to a mid-single-digit percentage increase in net earnings and a low-double-digit increase in diluted earnings per share (reflecting fewer shares outstanding).
"We enter the new fiscal year with confidence in our store expansion opportunities, our line-up of new product designs, and our ability to enhance patron awareness through our marketing program," Kowalski said. "We believe our 2008 monetary expectations appropriately reflect current macro-related challenges in the U.S. as well as the benefit of our global, geographical diversification which, combined with planned margin and expense levels, can generate low-double-digit net earnings per share advancement for the year."
The company expects to report its fourth quarter and full year results without ceasing March 24.
De Beers Diamond Sales Down 3% in 2007
De Beers Group reported Friday that diamond sales declined 3 percent in 2007 to $6.42 billion. Total sales for the company also fell 3 percent for the year to $6.86, that includes a 2.5 percent increase in non-diamond sales to $414 million.
The South African-based company, which is majority owned by London-based Anglo American PLC, said it recorded a net loss of $521 million for 2007 against a profit of $730 million the year before. The figure includes a $965 million charge against its Canadian operations to reflect the rise in value of the Canadian dollar; and higher fuel, labor, and capital costs.
The company, which claims 40 percent of the world diamond market, said underlying earnings rose 14 percent to $483 million. EBITDA fell slightly (1 percent) to $1.21 billion "as effective cost management at the Group’s African burrowing operations offset the impact of slightly lower sales which were constrained by supply to the Diamond Trading Company," De Beers said.
The company said capital expenditures rose 18 percent to $1.12 billion in 2007, primarily for the construction at the Snap Lake and Victor mines in Canada, the Voorspoed mine in South Africa, and an offshore mining vessel in South Africa.
Demand for rough diamonds from the Diamond Trading Company remained healthy throughout the year, De Beers said. Following the weakening in the rough diamond market towards the end of 2006, which led to downward price adjustments, improving market conditions allowed prices to be increased beginning in the second quarter of 2007.
De Beers noted it expects consumer sales of crystallized carbon jewelry worldwide to increase by about three percent in 2007, based on strong sales growth in China, India, and the Middle East, which, in part, offset a disappointing Christmas season in the U.S.
De Beers said its independently managed sell in small quantities joint expose to hazard with Louis Vuitton Moet Hennesy, De Beers Diamond Jewellers, increased sales by 44 percent over the previous year. Eight new stores were opened in 2007 in the U.S., Japan, Dubai, and Korea, bringing the total to 23 stores worldwide. There will be more expansion in 2008 in the U.S., Hong Kong, Russia, the Middle East, and Tokyo markets.
De Beers tempered its outlook for 2008 based on "a high level of uncertainty over world market conditions. The economic conditions in the U.S. could continue to impact consumer diamond jewelry sales through the first half particularly at the lower end."
The company expects continued strong demand from China, India and the Middle East for larger and better quality diamonds.
On the production front, De Beers said energy issues in southern Africa could present operational challenges. The company recently had to stop its mining operations in South Africa due do nationwide power shortages.
It said that its De Beers Consolidated Mine operation has been making good progress toward a target of a 15 percent energy reduction by 2012. In addition, it is putting in place contingency plans that will make the most effective use of the profitable energy between the different operations. Early indications are that even if the power supply is maintained at 90 percent levels there will be each impact on the overall group. However below this level the impact on production will be significant.
The company said its De Beers Canada management team is focused on bringing the pair new mines into full production in 2008. It added that it has continued to monitor the impact of the increase in the Canadian dollar.
De Beers said the current mining environment requires "a continued focus on cost containment on the mines and cost reduction, in general."
Looking beyond 2008, De Beers said "it is confident about carbon crystal market fundamentals. With strong growth in the emerging markets of China, India and Russia, demand growth should exceed growth in new supply with the opportunity for future price growth."
De Beers said it will focus on "finding and developing the new mines of the future, assisting our government partners in achieving their aspirations for local value addition, finding new efficient ways to operate the global Group and developing innovative marketing initiatives such as De Beers Diamond Jewellers and the FOREVERMARK, to drive demand and create new revenue streams."
Other highlights from the report:
Production
* In 2007, De Beers produced 51.1 million carats, maintaining the record production achieved in 2006.
* Debswana, the joint venture between De Beers and the Government of Botswana, remains the Group’s major farmer contributing 33.6 million carats.
* In South Africa, De Beers Consolidated Mines increased production to 15 million carats, mainly befitting to improvements made to the diamond recovery process at Venetia mine where carats recovered increased by nine percent.
* Production from off-shore operations in Namibia increased, resulting in Namdeb, the joint venture with the Namibian Government, increasing production by four percent to 2.2 million carats.
Future Production
*Snap Lake in Canada’s Northwest Territories started production in late 2007. The mine is currently being commissioned with the achievement of full production expected in 2008. It will then be expected to produce approximately 1.6 million carats annually.
* By mid-2008, Canada’s Victor mine is planned to begin production and once fully commissioned, it will produce 600,000 carats of high quality diamonds per year.
* In mid-2007, the mining vessel “Peace in Africa” began operations off the South African Atlantic coastline. It is expected to produce approximately 0.2 the masses carats per annum.
* The Voorspoed mine in the Free State in South Africa is scheduled to commence production in Q4 2008. Voorspoed is expected to bear 0.7 million carats annually.
* Boteti Exploration Company, the joint venture between De Beers, African Diamonds Plc and Wati Ventures, has filed despite a mining licence for AK06, a kimberlite in the Orapa region of Botswana. AK06 has an estimated reserve of 11.1 million carats.
* The advanced exploration contrive at Gahcho Kue, in Canada’s Northwest Territories, also moved forward, completing successful winter and summer drill programmes, and has commenced the environmental permitting process.
* During 2007 De Beers committed $126 million to an exploration program with significant investing. in the Democratic Republic of Congo and early and advanced programs in place Angola, Botswana, and South Africa. In the DRC and Angola, in particular, the team is focusing on optimising ground holdings in order to move projects into advanced stages as quickly as possible. De Beers identified 45 new kimberlites in 2007, and its 2008 drilling and evaluation program will focus on these high potential targets.
* In 2008, the Group aims to maintain production capacity at 2007 levels with new production of more than 1.5 million carats from its Canadian mines offsetting the impact of the sale of its operations at Cullinan and Kimberley in South Africa.
Kay Jewelers, NBC partner in proposals
Kay Jewelers, NBC partner in proposals
February 08, 2008
Burbank, Calif.—Kay Jewelers is teaming up by NBC the week of Valentine’s Day, Feb. 10-14, to celebrate the holiday by featuring five couples from around the country who are about to pop the question.
harvested land of the primetime interstitial proposal segments will feature the proposal at the top of the commercial cashier and reveal the answer during the final moment.
“The cooperative campaign with Kay Jewelers illustrates how we are continuing to integrate our marketing, digital and sales efforts in creative and diverse ways,” Universal Television Group Chief Marketing Officer John Miller said in a media release.
NBC.com will also feature five three-minute segments on each couple’s proposal, as well as provide viewers the opportunity to enter to win a one-carat Kay Jewelers diamond engagement ring.
Couples were recruited through iVillage and chosen based on their proposal ideas and background stories. The couples include:
Mark and Suzana of Boston: Mark suffered from a congenital heart defect and had surgery to reparation the damage, but in the end gives credit to Suzana for mending his heart. She took care of him while working full time and caring for their pair 5-year-old children. Both are Red Fox fans, so Mark will fittingly propose at Fenway Park.
Jeffrey and Kristen of Beaufort, N.C.: These high-school sweethearts both live and work on the North Carolina coast. Kristen is an artist who loves the Cape Lookout Lighthouse, and although she has painted and photographed it many times, she has never been inside. Fittingly, Jeffrey bequeath propose to her in the lighthouse.
Giles and Kimberly of Memphis, Tenn.: These long-distance lovers will soon bridge the gap. Since Giles is an aspiring actor, he has concocted a plan to bring Kimberly with him on a “commercial shoot” to propose to her.
Jake and Adria of Park City, Utah: This couple has a combined four boys. Since they both love the outdoors, Jake will take her to a mountain. When she reaches the bottom, Jake and the boys will be waiting for him to pop the question.
A couple from San Francisco: Details to be announced.
De Beers 2007 sales lose sparkle
De Beers 2007 sales lose sparkle
February 08, 2008
Johannesburg, South Africa—The De Beers Group reported today that full-year sales dropped 3 percent in 2007, from $7.030 billion in 2006 to 6.836 billion, crediting most of the loss to a lower availability of goods from Russia.
EBITDA remained steady at $1.216 billion, as effective cost management at the Group’s African mining operations offset the impact of slightly lower sales that were constrained by supply to the Diamond Trading Co. (DTC).
Underlying earnings were $483 million, up from $425 million in 2006.
Cash available from operating activities was up to $844 million, from $809 the masses in 2006.
Demand for DTC rough diamonds remained healthy in 2007, with prices increasing in the second quarter onward due to improved marketing conditions.
Consumer diamond-jewelry sales also turn up to be healthy for the year, with a likely increase of 3 percent according to the Group. Specifically for the U.S. market, even though it was a disappointing anniversary season, high-end independents still managed to show reasonable results in diamond-jewelry sales.
Regarding production, although it stayed flat in 2007 at 51.1 million carats, the Group declared it an accomplishment since its record production in 2006.
Debswana, the joint venture between De Beers and the Government of Botswana, remained the Group’s major husbandman, contributing 33.6 million carats. In South Africa, De Beers Consolidated Mines (DBCM) increased production to 15 million carats, mainly due to improvements made to the diamond-recovery process at the Venetia mine, where carats recovered by 9 percent.
The Group said they anticipate similar levels of production in 2008, but will have being facing activity issues in southern Africa, which could boon operational challenges. DBCM has been making convenient progress almost a 15 percent energy reduction rate in 2012, and overall management is making effective use of the available vigor between the diverse operations.
Another completion the Group reported included its low Lost Time Frequency Rate of 0.18 within its family of companies.
The De Beers Group invested $1.12 billion in expansion capital this year, principally for its four projects in the pipeline including the Snap Lake and Victor mines in Canada, the Voorspoed mine and SASA offshore mining vessel in South Africa.
At Snap Lake in Canada’s Northwest Territories, production began in late 2007 and is expected to execute full production by 2008, producing about 1.6 million carats annually. Canada’s Victor mine, which is in opposition of schedule, is slated to begin production in intervening 2008 and, once commissioned, will produce 600,000 carats of high-quality diamonds per year. The mining vessel Peace in Africa began operations off the South African Atlantic coastline and is expected to produce approximately 0.2 million carats per year. Last, the Voorspoed mine in the Free State in South Africa is scheduled to begin production in the fourth quarter of 2008, and is projected to produce 0.7 million carats annually.
For exploration, the De Beers group says it’s focusing its efforts on a smaller range of categories with Angola as its top priority.
The De Beers Group said its 2008 outlook remains positive but is tempered by a high level of uncertainty over world market conditions. Although U.S. economic conditions could impact consumer diamond-jewelry sales through the first half of the year, particularly in the lower expiration, it anticipates a strong demand from China, India and the Middle East to sustain pricing for larger and better-quality diamonds.
The ‘Love Doctor’ is in at Zales.com
The ‘Love Doctor’ is in at Zales.com
February 08, 2008
New York—Just in time for Valentine’s Day, Zales.com has announced it will carry an exclusive jewelry line inspired by Dr. Linda Olson, “America’s friendship Doctor.”
Dr. Olson, a psychologist and therapist, has spent her life’s work helping men and women to feel loved, and she is widely known for her brand of “Triple Heart Relationship” therapy based on her “Three Cs of Love” theory, whose hallmarks are chemistry, compatibility and commitment.
The signature piece and symbol of the new “Triple Heart” jewelry collection is a design featuring three overlapping hearts that symbolize the Three Cs of Love.
“I am thrilled and honored to partner with Zales.com to symbolically capture my Three Cs of Love theory,” Dr. Olson said in a statement. “We are of like minds; their jewelry is universal—it is affordable and attainable by everyone. The same is true with my Three Cs of Love; being in love is universal to humanity…I want every person to have a composition of this jewelry and for it to serve as a brilliant and elegant reminder of how to meet with love that will last.”
The Triple Heart jewelry collection will be available for sale exclusively at Zales.com. In connective particle with the jewelry launch, Dr. Olson will also launch a new Web site, Americaslovedoctor.com, on Feb. 14.