Charles & Colvard Quarterly Sales Down 11%

Charles & Colvard, Ltd, the Morrisville, N.C.-based creator of moissanite, said Monday that second-quarter net sales decreased 11 percent to $7.6 million as compared to $8.5 million in the second quarter of 2006. Gross profit decreased 14 percent to $5.5 million compared to $6.4 million in the prior year period. Operating income for the same period, ended June 30, decreased 47 percent to $889,000 from $1.7 million for the same period in 2006.

Net income for the second quarter of 2007 decreased 52 percent to $529,000 compared to a net income of $1.1 million in the comparable period of 2006.

Charles & Colvard’s domestic sales in the second quarter decreased 12 percent to $6.3 million compared to the second quarter of 2006. International sales for the second quarter decreased 8 percent to $1.2 million. Strong results from Thailand and Taiwan were offset by reduced sales to Canada. Total shipments of 46,800 carats for the current period were 9 percent less than the 51,100 carats shipped in the same period of 2006. Shipments of carats in the U.S. decreased 7% while international shipments of carats decreased 15 percent.

“Our second quarter sales results reflect a number of factors, including a weak overall jewelry retail environment,” said Bob Thomas, Charles & Colvard president and chief executive officer. “Sales of moissanite jewels to our top four direct customers, which represented 71 percent of total sales, were down 18 percent in the second quarter compared to the prior year. At the same time, sales to our remaining direct customers were up 14 percent over the same quarter last year.”

Thomas also said that the company is delaying its chain-wide rollout at Sears, originally scheduled for the second-half of the year, in order to provide additional time to test its moissanite category. He added that overall sales of moissanite are expected to be stronger in the second half of the year based on “retailers accelerate their rollout for the holiday season and the total moissanite door count at Kohl’s continues to ramp up.”

He said that as a result, the company is adjusting its annual revenue expectation to a range of $35 million to $38 million for the full 2007 fiscal year, less than previously expected.