Jewelry sales up 7% in 2010
By Michelle Graff www.nationaljeweler.com
Business rebounded in 2010 for retail jewelers following three difficult years in which global economic turmoil stymied sales, Jewelers of America’s 2011 Cost of Doing Business report shows.
Released Monday, the Cost of Doing Business is a benchmarking tool for the jewelry retail marketplace, analyzing financial data from the previous year. A total of 204 companies participated in this year’s survey, down from 331 last year and 687 respondents in 2009. This marked the second year in a row that JA did not mail a questionnaire for the survey, with the vast majority of respondents completing it online instead.
Survey-takers reported a median sales increase of 7 percent, the first year the report has shown growth since 2006, when retailers reported their sales were up 4 percent. Sales were down 0.3 percent in 2007, 4 percent in 2008 and 5 percent in 2009.
While all store types recorded sales increases in 2010, it was the chain stores that demonstrated the most dramatic turnaround, the report shows. After declining 14 percent in 2009, chain stores recorded sales growth of 4 percent in 2010.
Independent high-end retailers also made a comeback in 2010. Sales declined 8 percent for these retailers in 2009, but were up 4 percent last year.
Meanwhile, independent mid-range retailers saw their sales climb 7 percent after declining 1 percent in 2009. (Designer/artist/custom jewelers were not sufficiently represented in this year’s survey to be included in the change-in-sales-by-store-type breakout.)
“Increases were reported to be quite similar across jeweler types,” the report notes. “Continuing to manage and market is vital to success in any environment -- especially in the current climate where prospects for economic growth remain uncertain.”
The profit problem
While sales were up, profits did not increase appreciably year-over-year, holding steady at 4 percent.
“The outstanding profitability of the late 1990s continues to elude the majority of responding firms. While the respondents overall continue to show profitability, profitability did not increase commensurate with sales,” the report states.
Furthermore, not all firms are profitable. Twenty-three percent of survey-takers reported a negative net profit to net sales while 29 percent were profitable but reported their profits hovered around 4 percent or less.
In addition, margins stagnated at 49 percent after increasing slightly in 2009. Margins slipped for both mid-range independents and high-end stores (from 48 percent to 46 percent). Chain stores, meanwhile, saw margins increase from 47 percent to 50 percent while designer/artist/custom shops also experienced a 3 percent increase in margins, from 50 percent to 53 percent.
High vs. low
Each year, JA includes a comparison of high-profit, defined as firms that are in the upper 50 percent of all companies as ranked by the ratio of earnings before interest and taxes (EBIT) to total assets.
The data shows that high-profit firms turn over their inventory more quickly, have higher per-square-foot and per-full-time employee sales, and slightly smaller stores, 2,450 square feet compared to 2,616 square feet for low-profit firms.
High-profit firms spend less on payroll, employee training and education, advertising and promotion and “other” operating expenses while spending more on occupancy.
“Managing any business requires attention to detail. This is true for retail jewelers as well,” the report states. “Inattention to operations resulting in small cost increases in a number of areas appears to explain much of the difference between being very profitable and not profitable. Low-profit does not mean low sales volume.”
What’s selling
The 2011 Cost of Doing Business report shows that diamonds, both loose and set in jewelry, continue to decline as a percentage of jewelers’ sales.
Diamonds constituted 41 percent of jewelers’ sales in 2010, 31 percent of which was diamond jewelry while the remaining 10 percent was loose diamonds.
Though diamonds remain the single largest category for jewelers, this is the fourth year in a row that sales in the category have slid. The stones, both loose and set, made up 52 percent of sales in 2007, 49 percent in 2008 and 46 percent in 2009.
Creeping up were sales of estate/antique jewelry, which increased from 3 percent last year to 7 percent this year; fashion jewelry, which increased from 5 percent last year to 8 percent this year; and repairs, which rose from 10 to 12 percent.
Other notes from the report include:
-- Jewelers in free-standing buildings represented the largest group of survey respondents at 40 percent, up from 30 percent. This is shift from the 2010 report, when downtown merchants represented the largest group of respondents.
-- The majority of survey-takers, 73 percent, rent their stores, up from 60 percent last year. The percentage of jewelers in the survey that own their stores fell sharply, from 30 percent last year to 10 percent this year, reflecting the substantial change in survey respondents.
-- More than half of those surveyed (55 percent) still said they view themselves as a retailer who likes jewelry, up from 46 percent last year. However, the percentage of those who see themselves as a businessperson nearly doubled year-over-year, climbing from 10 percent to 19 percent.
-- The percentage of respondents who use the Internet for promotional purposes increased from 47 percent in 2009 to 54 percent in 2010. The percentage of those who use the Internet for promotion and sales stayed about the same, 37 percent in 2009 vs. 36 percent in 2010, while the percentage of jewelers who said they had no plans to use the Internet slipped, from 6 to 4 percent.
JA’s 2011 Cost of Doing Business Report is available to JA members for $24.95. The cost to non-members is $150.
To order, visit the “Business Resources” section of Jewelers.org, or contact JA’s member services at 800-223-0673 or info@jewelers.org.
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