RAPAPORT…
U.S. Jewelry CPI Jumps
The consumer price index (CPI) for jewelry continued to
soar, jumping 11 percent year on year in August to a record high of 179.75
points. The reading marked the eighth consecutive month with a total greater
than 170 points. The August reading broke the previous record high set in July.
Jewelry inflation has been driven higher by continued strong year-on-year price
increases for diamonds, gold and silver.
The CPI has now been above 150 points for 43 consecutive
months. The jewelry price index is based upon the reference point of average
prices in 1986, which is set at 100 points. Meanwhile, the CPI for all product
categories rose 3.8 percent year on year in August to 226.27 points. The base
period for that overall reading was provided by an average of 100 points taken
from 1982 to 1984.
IMF Lowers Growth Forecast
The International Monetary Fund (IMF) lowered its
expectations for economic growth due to “multiple shocks” and insufficient
rebalancing efforts by the major economies. The global economic recovery is
slowing and world growth is now projected at 4 percent in both 2011 and 2012,
down from an earlier prediction of 4.3 percent and 4.5 percent respectively.
But the IMF said that even a 4 percent rate of growth counts on “a lot going
well.”
“The global economy is in a dangerous new phase,’’ noted the
IMF in its statement. IMF’s chief economist Olivier Blanchard warned, “Only if
governments move decisively on fiscal policy, financial repairs, and external
rebalancing, can we hope for stronger and more robust recovery.’’
In the group’s latest predictions, economic growth was
lowered by 1 percentage point for the U.S. to a 1.6 percent rate of growth in
2011 and by nearly as much for 2012 to 1.9 percent. The Euro-zone was lowered
0.4 percentage points for 2011 to 1.5 percent. The IMF lowered growth rates
slightly for China and India as well, however, both economies should experience
high-single-digit rates of growth in 2011 and 2012.
The global body surmised that there must be internal
rebalancing from government stimulus to private demand in the major economies.
“Despite considerable progress on this front in many countries, the major
advanced economies lag behind. Reasons vary by country but tight bank lending,
repercussions from the housing boom, and high household indebtedness are all
putting stronger brakes on the recovery than expected,’’ the group concluded.
The IMF cited three main risks to the global economy moving
forward. For the Euro-zone, banks must be made stronger, not only to avoid
deleveraging and maintain growth, but also to reduce risks of vicious feedback
loops between low growth, weak sovereigns, and weak banks. This requires
additional capital buffers, from either private or public sources. In the U.S.,
top priorities to reduce risk include devising a medium-term fiscal
consolidation plan to put public debt on a sustainable path and to implement
policies to sustain the recovery, including by easing the adjustment in the
housing and labor markets.
Department Store Sales Down
U.S. department store sales in August fell 0.7 percent to $15.3
billion year on year on an adjusted basis, according to the U.S. Department of
Commerce. Retail sales data, provided by the government on a one-month delayed
schedule, revealed that jewelry store sales rose 7.7 percent year on year in
July to $2.02 billion on an unadjusted basis.
According to the National Retail Federation (NRF), retail
sales in August, which exclude automobiles, gas stations, and restaurants, rose
6 percent year on year on an unadjusted basis. “Consumer spending in August was
tempered by a continued lack of confidence in the strength of our economy,’’
said NRF’s president, Matthew Shay. “Having carried the brunt of the economic
recovery so far, consumers may be waiting for good news in terms of employment
and market stability, cautiously spending on things they need and thinking
twice about things they want.’’
NRF’s chief economist, Jack Kleinhenz, added, “Consumer
spending has stalled, and it will be important for consumers to see positive
changes in the economic outlook going into the fourth quarter. While we’re not
expecting a complete pull back in spending, the outlook remains modest in terms
of growth.’’
Zale’s Sales Rise
Zale’s fourth quarter sales rose 9.4 percent year on year to
$377.3 million for the three months that ended on July 31, 2011. Same-store sales
rose 9.8 percent, and at a constant exchange rate with Canada, comparable store
sales rose 8.5 percent. Matt Appel, Zale’s chief financial officer (CFO), noted
that the fourth quarter was the third consecutive quarter of positive same
store sales
Same-store sales rose 8.1 percent for the fiscal year, but
the figure was 7.1 percent when factoring in constant exchange rates with
Canada.
Matt Appel, Zale’s chief financial officer, noted that the
fourth quarter was the third consecutive quarter of positive same store sales.
“Despite the headwinds imposed by volatility in commodity markets and the
overall economy, our gross margin performance in the quarter and full year
reflects the traction we are gaining in the marketplace,” Appel stated.
Gitanjali’s Major Brands Top $1B
Gitanjali Gems Ltd. reported that the collective value of
its nine major Indian brands is $1.21 billion (INR 55.84 billion) following a
brand valuation carried on behalf of the company. The brands include Gitanjali,
Gili, Nakshatra, Asmi, D’Damas, Gitanjali Jewels, Maya Gold, Gitanjali
Lifestyle and Shuddhi.
London-based Brand Finance Plc, which conducted the study,
valued four of the brands — Gili, Nakshatra, Asmi and D’Damas — at $326 million
(INR 15.02 billion) at the end of 2009. Gitanjali conducted the brand valuation
as a part of an initiative with KPMG to restructure its business in an effort
to raise its value to attract private equity investors. The restructuring is
based upon three pillars: diamond and jewelry manufacturing, domestic branded
jewelry and international branded jewelry.
The company has yet to value its international brands, which
include Stefan Hafner, iO Si, Porrati, Novelle Bague and Valente in Italy, and
Samuels and Rogers in the U.S., among others.
The company noted that the current focus of expansion is on
fulfilling niche consumer demands and penetrating small-to-mid-size cities
where consumers are attracted to branded products.
Damiani’s Sales Climb
Damiani S.p.A. reported revenue of about $48 million (EUR 32.9
million) for its first fiscal quarter, which ended on June 30, 2011,
representing a 24 percent year on year increase in sales. Retail revenue grew
14 percent while wholesale sales improved 29 percent. In key regions, and at
constant exchange rates, sales rose 27 percent in Italy to almost $36 million
(EUR 24.8 million), while revenue surged 64 percent in the Americas to $1.9
million (EUR 1.3 million). Japan, however, experienced a 6 percent decline to
$3.25 million (EUR 2.25 million). Sales for other locations improved 24 percent
to $6.4 million (EUR 4.4 million).
