JA: Sales, Profit Up for Jewelers in 2006

Overall, 2006 was a good year for jewelry retailers and a great year for those jewelers who specialize in high-end and custom jewelry, according to Jewelers of America 2007 Cost of Doing Business Survey, which analyzes JA member stores’ financial data from 2006.

Sales Growth and Profit
According to the results all jewelry retail categories saw sales growth, although it was varied. The median growth for all jewelers was 4.1 percent (up slightly from 3.9 percent in 2005). Independent high-end retailers fared best with a 7.4 percent sales increase over 2005, which is in keeping with 7.1 percent growth of jewelry sales nationwide, according to IDEX Magazine. Designer and custom retailers also saw sales growth at 6.5 percent. Chain stores experienced 4.3% sales growth, while mid-range retailers had the least growth with only 2.4 percent increase over 2005 sales.

Store profitability saw a significant 32 percent increase over 2005 results, according to the survey. In 2006, JA retailers had a median 5.3 percent net profit as a percent of net sales compared to last year’s 4 percent. Although gross margins fell last year, the overall gross margin was up to 49.1 percent from 48.4 percent in 2005.

Share of Sales
The Survey shows that the distribution of sales remains consistent from year to year. Diamonds (loose and set) are still in the majority with 50 percent of sales. Colored stone jewelry (10 percent) and karat gold (8 percent) provide the other two largest shares of retailers’ sales.

High-Profit vs. Low-Profit Stores
Since growth is becoming more varied, it is clear that effectively managing and marketing is vital to the success of retail stores, and differentiates high-profit from low-profit firms. While high-profit stores in 2006 did not necessarily have greater sales per store ($985,000 on average compared to $1,179,000 for low-profit stores), they did have characteristics of efficient management: higher sales per square foot and turnover frequency, but lower payroll and operating expenses, according to the results. For instance, high-profit stores had a 20 percent greater inventory turnover than low-profit firms and, therefore, much higher sales growth (6.8 percent versus 3.7 percent)

High-profit retailers also contain their operating expenses by spending a lower percentage of net sales on payroll (17.8 percent compared to the average of 22.4 percent of low-profit firms). In fact, high-profit retailers are so efficient at saving on occupancy, advertising, and other related expenses, that they spent 7.2% less on total operating expenses than low-profit companies in 2006

The JA 2007 Cost of Doing Business Survey represents comparative financial information available. JA compiles data from a cross section of retail jewelers: independent high-end and independent mid-range firms, jewelry chains, and designer or custom jewelers all responded. The survey contains 75 pages of data tables that measure key performance areas like expenses, sales growth, and inventory.

To order the 2007 Cost of Doing Business Survey, visit www.jewelers.org or call Jewelers of America at 800-223-0673. It is available to JA members for $24.95, and to non-members for $150.