JA: Industry growth flat in 2007

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JA: Industry growth flat in 2007

Designer/custom jewelers see greatest sales increases

July 30, 2008

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New York—Overall growth in the jewelry industry was essentially flat in 2007, with high-end independents seeing a 3.5 percent sales increase, while mid-range independents saw real declines, according to Jewelers of America's (JA) 2008 Cost of Doing Business Survey.

Overall growth in the industry, flat for the first time since 2001 and 2002, was -0.3 percent on average, down from 4.1 percent in 2006.

Designer/custom jewelers fared best, with a 6.1 percent sales increase over 2006. Independent high-end retailers followed suit, but the 3.5 percent sales increase the category experienced was down from 2006 when the category was up 7.4 percent. Chain stores experienced 2.5 percent sales growth, while mid-range retailers were down 1.7 percent compared with 2006 sales.

Profitability declined in 2007 as did gross margins, down to 48.7 percent from an increase of 49.1 percent in 2006. Results varied by type of specialty jeweler, with independent high-end retailers seeing their margins improve slightly to 45.2 percent (versus 42.9 percent in 2006), while chain stores and designer/custom jewelers were pressured by lower margins. Gross margins at independent mid-range retailers were steady from year to year.

The survey shows that the distribution of sales remained consistent from year to year. Diamonds (loose and set) are still in the majority, with 52 percent of sales, up 2 percent from 2006. The next biggest product categories are colored-stone jewelry (10 percent of sales) and karat gold jewelry (8 percent of sales). Repair sales continue to be important, bringing in 11 percent of sales, up 1 percent from 2006. Sales of timepieces went from 4 percent of sales to 3 percent of sales, compared with 2006.

Industry analyst Ken Gassman, who JA commissioned this year to do a supplementary analysis of the survey, noted that while financial results for 2007 were less robust, the business is cyclical.

"It wasn't a bad year in 2007; rather, it was clear that the industry hit its 'high water' mark in 2006, and the tide began to recede in 2007, a trend that continues today," he said.

JA's 2008 Cost of Doing Business Survey, which analyzes JA member stores' financial data from 2007, represents the most complete and historical comparative financial information available to specialty jewelers in the United States. It compiles data from a cross section of jewelers, including independent mid-range retailers (36.5 percent), independent high-end retailers (22.6 percent), designer/custom jewelers (11.8 percent) and chain stores (7 percent).

To order the survey, call JA at (800) 223-0673 or visit the organization's Web site, Jewelers.org. The survey is available to JA members for $24.95 and to non-members for $150.

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