Majors
|
|
|
Tough holiday leads to cutbacks, worse for chains
By Michelle Graff
April 14, 2009
|
| This diamond cocktail ring was among the pieces Zale Jewelers offered this holiday season. |
|
|
New York--A disappointing 2008 holiday season left the country's major retailers scrambling to cut costs in 2009, with numerous chains--including Macy's and Target--sending American workers to unemployment lines in droves.
And, just like other retailers, jewelry retail chains were not immune to sinking sales and the contagious flurry of pink slips.
Irving, Texas-based Zale Corp., the largest U.S. retail jewelry chain by number of stores, with some 2,135 units, saw sales decline 19.5 percent in November and December to $582 million, with same-store sales dropping 19.6 percent during the same months. As the year began, there wasn't much improvement. Sales for Zale dropped from $828 million in the second quarter of 2008 to $679 million in the second quarter of 2009, ended Jan. 31. During that same period, same-store sales declined 18.1 percent.
The holiday season was not much merrier for Sterling Jewelers, the nation's top jewelry chain in terms of sales. Its fourth-quarter sales decreased 13.8 percent to $862.1 million, while same-store sales dropped 16.1 percent. Year-end sales were a little better, dropping 6.3 percent overall to $2.54 billion, and 9.7 percent in terms of same-store sales for the fiscal year 2009, which ended Jan. 31.
On a positive note, Sterling reported that U.S. same-store sales for the first seven weeks of the current quarter were down by just 2.7 percent compared with the same period a year ago, with strong Valentine's Day results, and that gross margins for the period were "meaningfully" up.
Over the holidays, even the normally solid Tiffany and Co., which ranks as the country's 14th largest jeweler, with approximately 70 stores, saw U.S. sales plummet in November and December, with overall sales during that time period dropping 31 percent, and same-store sales down 35 percent. In the Americas, full-year sales were down 10 percent to $1.59 billion, while fourth-quarter sales dropped 29 percent to $458.9 million.
This included a 16 percent drop in U.S. same-store sales for the year, and a precipitous 33 percent decline in same-store U.S. sales in the fourth quarter.
Multichannel electronic retailers, who rely heavily on jewelry sales, did not fare much better.
At ShopNBC, year-end sales decreased 28 percent, walloped by a 35 percent decline in the fourth quarter, with the company citing jewelry and laptop sales as its two weakest categories.
West Chester, Pa.-based QVC's parent company, Liberty Media Corp., announced plans in November, before the holidays, to lay off 700 workers, or about 5.8 percent of its workforce, over the subsequent 14 months. QVC saw worldwide sales decline 8 percent to $2.14 billion in the fourth quarter, and drop 1 percent to $7.3 billion for the year.
In the United States, QVC sales slipped 6 percent for the year to $4.91 billion and 12 percent in the fourth quarter to $1.48 billion, with QVC President and Chief Executive Officer Mike George noting that jewelry and apparel were the "most challenged" categories.
During both the fourth quarter and 2008 as a whole, sales for QVC shifted away from jewelry to beauty and, to a lesser extent, home products.
The country's major jewelry retailers, such as Zale and Sterling were staying afloat, but smaller chains struggled, with 20-store Fortunoff Fine Jewelry and Silverware LLC, 15-store Christian Bernard Stores Corp. and 25-store Shane Co. all filing for bankruptcy between December 2008 and February 2009.
In February, jewelry retailer Finlay Enterprises revealed details of a "strategic plan that includes pulling out of the department store business and focusing solely on running standalone jewelry stores."
Industry analyst Ken Gassman predicts that a number of smaller chains and mom-and-pop operations will crumble under the economic pressure in 2009.
But it won't be a year in which the country loses the number of doors it did in 2008, when the shuttering of mega-chains Friedman's and Whitehall Jewelers wiped out nearly 1,000 doors nationwide.
"I'm not looking for Zale to go out [of business]," Gassman says. "Finlay might have financial problems, but I'm not looking for them to go out either."
The good news for jewelers who hang on, majors and independents alike, is that they will be the beneficiaries of a stronger, larger market, especially for bridal sales, Gassman says, citing a U.S. birth-rates study that reveals that the country is set for a spike in weddings--and thereby engagement and wedding ring purchases--between now and 2016.
"Those jewelers who emerge will emerge to a market that's growing and fueled by some strong factors," Gassman says.
Holiday hangover for staffers
In January, Sterling, a subsidiary of Bermuda-based Signet Jewelers Ltd., which operates retail chains in both the United States and the United Kingdom, laid off 114 workers at its 2,000-employee Akron, Ohio, headquarters.
Sterling spokesman David Bouffard said Sterling plans to eliminate another 200 positions by attrition--not replacing workers lost to retirement or other factors.
The company is also aligning expenditures in areas including payroll, merchandising and marketing with current sales.
Asked about possible store closures, Bouffard says the company chooses not to shutter 100 stores at a time, but instead evaluates store performance on a regular basis as leases near their expiration.
"That's been on a continual basis," he says. "We're opening stores and closing stores on a continual basis. We're always looking at underperforming stores."
While Sterling trims staff to combat falling sales, Zale is also doing all it can to cut costs, says spokesman David Sternblitz.
Zale Chief Executive Officer Neal Goldberg called the 2008 holiday season "the most difficult in memory due to the overall macroeconomic situation."
He said the company was going to take any actions deemed necessary to maintain its strong financial position in 2009.
Questioned in the wake of the Sterling layoffs, Sternblitz reinforced Goldberg's aggressive stance on cost-cutting measures.
"We have made no announcement," regarding layoffs, he said, "but did say in our holiday press release that we intended to continue driving improvements in product and efficiency. We will maintain our solid financial position by taking whatever actions are necessary to adjust expense levels to sales trends during 2009."
Even iconic jeweler Tiffany and Co. is taking a cautious stance to spending in 2009.
Due to weak sales that preceded the holiday season, Tiffany announced in a November release that is was "planning to reduce staffing in light of reduced consumer demand," a strategy that includes an early retirement plan.
Still on air
Another company shifting its strategy to combat falling sales is Minneapolis, Minn.-based multichannel retailer ShopNBC, which remains in the market for a buyer after its 2008 effort to find either a buyer or strategic partner failed.
After seeing sales slide by 35 percent in the fourth quarter, the company is taking a Wal-Mart approach to 2009, rolling back prices on merchandise across the board, including fine jewelry.
ShopNBC Senior Vice President of Merchandising Kris Kulesza told National Jeweler that the electronic retailer's customers are shying away from higher-end karat gold and diamond jewelry in favor of sterling silver, costume lines and brands such as Brilliante, its existing line of sterling silver, plated gold and cubic zirconia jewelry.
"What we're seeing is that the customer is responding to the fashion side of jewelry," Kulesza says.
Those ShopNBC customers still buying fine jewelry are sticking with more classic pieces such as diamond stud earrings or solitaire pendants, Kulesza says.
Heading into 2009, she says the retailer's jewelry inventory is at its lowest level ever.
As a result, the company is looking to add new vendors that carry lower price-point, margin-making pieces that will have more appeal to today's cash-strapped consumers.
Kulesza says ShopNBC's jewelry margins suffered in 2008 due to markdowns the company had to make to remain competitive and to clear out merchandise that was not selling.
"Women still love to buy jewelry as an accessory," she says. "It's a great way to dress up or add to an outfit. Those reasons still stand. It's just a matter of how much they are willing to spend on it."
Editor's Note: This story first appeared in the March 2009 print edition of National Jeweler and was updated to reflect newer financial reports.
|
|
Majors
A shareholders' class-action lawsuit has been filed against Zale Corp., its chief executive officer and three former executives, claiming the Irving, Texas-based, 1,931-store chain deliberately deceived investors. Read More
|
Small multi video player located on right rail of NJN site
|
Save
E-mail
Print
Most Popular
RSS
Reprints
