TOP OF THE NEWS

De Beers Announces Pricing Change

De Beers recently introduced a major change in its diamond pricing policy—and some think even more dramatic changes are on the way.

The company announced that, in the future, price “adjustments” will be made more frequently—and the company will no longer regularly announce them to the market. In the past, De Beers instituted price “increases” only, and its stated position was that the price of diamonds should never decrease. But analysts say that the “new” De Beers is willing to let prices both rise and fall and is now responding to market conditions rather than trying to set them.

The Financial Times also announced De Beers would soon announce new criteria on how it chooses its sightholders. The Times said this would add greater “transparency” to a process long shrouded in secrecy.

Other press accounts speculated that there were greater changes on the way; that De Beers would be giving up its contracts with Canada and Russia and concentrating on its own mines or that De Beers was planning to liquidate its $5 billion stockpile of stones.

But De Beers spokesman Andrew Lamont says, “I can assure everyone that we will remain the world’s leading diamond-producing entity and the world’s leading diamond distribution company.” As for the stockpile, he says it would be unrealistic to liquidate instantly but notes that “carrying a $5 billion stockpile doesn’t make that much commercial sense.” — Rob Bates

ACQUISITIONS

Frederick Goldman Acquires ArtCarved

Frederick Goldman Inc., a leading bridal jewelry manufacturer, has acquired ArtCarved, one of the oldest and best-known bridal jewelry brands.

Goldman announced on May 10 that it had acquired the assets of the 150-year-old firm from its former owner, Aurafin. Details of the transaction weren’t released.

ArtCarved joins Keepsake and Diana, two other jewelry brands owned by Goldman. Its bridal jewelry collection consists of some 300 styles, including carved wedding bands and diamond wedding and anniversary bands. Items in the line are available in 14k and 18k gold and platinum and feature stones from .10 ct. to 1 ct. in weight. Prices range from $250 to $2,000.

Frederick Goldman officials promised to boost ArtCarved business in retail stores through additional marketing tools, selective distribution, and “intense recognition and leverage” in the bridal jewelry market. The company plans to launch a new “re-imaging” advertising and promotional campaign for ArtCarved in 2001.

Frederick Goldman, founded in 1945, is based in New York City and employs 1,000 people at two locations.—William George Shuster

Signet Buys Marks & Morgan for $115 Million

The London-based Signet Group, parent firm of Sterling Inc., has bought Marks & Morgan, the ninth largest U.S. specialty retail jeweler, for $115 million. Its stores, which will be operated by Sterling, are located in malls throughout the Southeast. The acquisition was announced June 1.

About 80 of Marks & Morgan’s 137 stores will be converted to Kay Jewelers, Sterling’s national signature chain. The rest will be integrated into Sterling’s regional chains. Sterling is the second largest U.S. jeweler. Marks & Morgan, headquartered in Augusta, Ga., was formerly known as Friedman’s Jewelers (not to be confused with Friedman’s Inc., the national jewelry chain based in Savannah, Ga.) and has been in business for eight decades.

Signet agreed to pay cash to acquire all outstanding shares of the privately owned firm and will repay about $45 million in Marks & Morgan’s debt. The transaction is expected to be completed by the end of this month.

The acquisition will double the number of Sterling-operated stores in the Southeast to 281 and significantly increases the presence of Signet in a key geographic area where it is currently underrepresented. The target customers and merchandise mix of the two companies are similar.—William George Shuster

Friedman’s to Reimburse Customers Who Bought Credit Insurance

Friedman’s Inc., the third largest U.S. retail chain jeweler, has agreed to fully reimburse its West Virginia customers for the cost of credit insurance they purchased unwittingly when they bought jewelry.

Friedman’s probably will have to pay at least $1 million, or about $100 per transaction, according to deputy attorney general Jill L. Miles of the state consumer protection/antitrust division. More than 10,000 transactions and some 3,600 people have been affected since Friedman’s opened in the state in 1995. Friedman’s operates about 600 stores nationally, including six in West Virginia.

A lawsuit filed by state attorney general Darrell V. McGraw Jr. on Oct. 14, 1999, alleges that Friedman’s sold credit life, credit disability, and property insurance to West Virginia consumers who bought jewelry on the store’s private credit card without their knowledge or consent. That is “an unfair or deceptive business practice” under the West Virginia Consumer Credit and Protection Act. The suit also charges that none of Friedman’s employees was licensed to sell insurance in the state.

Earlier this year, a state judge ruled on the second charge, upholding the state’s claim. “At that point, they had lost the case,” says Miles. Officials on both sides sat down March 27 to work out a settlement.

In the court order, announced May 1, Friedman’s agreed not to sell or charge for insurance without consumers’ consent. The company will tell consumers which documents pertain to insurance and have someone on the premises who is licensed to sell insurance.

Friedman’s also agreed to provide the names and addresses of “every West Virginian they have charged since 1995 until March 27,” says Miles. The store will disclose the amount these customers paid for insurance, including interest charges. Friedman’s says it agreed to the actions to “resolve the concerns of the state” but denies wrongdoing. — William George Shuster

Berkshire Hathaway to Buy Ben Bridge

Ben Bridge Jeweler, a 63-store, family-owned jewelry chain, will be sold to Berkshire Hathaway Inc. The purchase agreement was signed May 18, and completion of the transaction is expected this month. The value of the deal—a cash and stock transaction—wasn’t released.

Ben Bridge will become a wholly owned subsidiary of Berkshire Hathaway. However, there will be no changes in the management, name, or operations of the Ben Bridge chain, company officials tell JCK. Its headquarters will remain in Seattle.

Ben Bridge Jeweler was founded in 1912 by Samuel Silverman, a Seattle watchmaker who later sold the business to son-in-law Ben Bridge. Bridge turned it over to sons Herb and Robert. Today, it’s managed by their sons, president/co-chief executive officer Ed Bridge and vice chairman/co-chief executive officer Jonathan Bridge. Business has risen steadily in the past decade—revenues were up 25% for 1999 and are expected to increase this year, as well. The company has 750 employees in 11 states, mainly in the West.

Berkshire Hathaway, based in Omaha, Neb., is a holding company owned by Warren Buffet, one of the world’s richest men. Though primarily involved in property/casualty insurance and reinsurance, it also owns two other important jewelry operations—Borsheim’s, based in Omaha, Neb., and the 200-store Helzberg Diamonds chain, headquartered in Kansas City, Mo. The firm also has significant stakes in American Express, Coca-Cola, Gillette, Walt Disney, the Washington Post Co., and Wells Fargo.

Ed and Jon Bridge told employees that “this alliance … will continue the tradition of our grandfather and fathers in overseeing the management and the long-range planning of the company.” The arrangement ensures “a smooth transition from this generation to the next, a concern that has been at the center of this action,” said Jon Bridge.

The Bridges began talking “through a mutual friend” with Berkshire Hathaway officials about a merger early this year, says Ed Bridge. The company’s success was a reason for the decision, he says. “If you’re going to sell, now is a good time to do it.” — William George Shuster

Modern Jeweler Parent Company Is Sold

Cygnus Business Media, the parent company of Modern Jeweler magazine and 48 other business-to-business publications, has been sold to CommerceConnect Media for $275 million. Cygnus, based in Melville, N.Y., also operates 16 trade shows and conferences and 17 custom publications and has more than 430 employees. Prior to 1997, it was known as PTN Publishing. CommerceConnect Media, a seven-month-old company, has its corporate offices in Westport, Conn.

According to a report in Folio, the trade magazine for business-to-business publishing, the deal represents a spectacular increase in value for Cygnus.

Tim Murphy, publisher of Modern Jeweler, says that in the three years since it’s been Cygnus, the company has become the 29th fastest-growing publishing company in America. Modern Jeweler, he says, has been a part of that growth.

“We’ve had some wonderful growth years. The new owners have access to a lot of capital, so it can only position Modern Jeweler for even more growth,” he tells JCK. “In terms of the jewelry industry, this acquisition will be seamless. The industry won’t see anything.”

Separately, Modern Jeweler’s executive editor, David Federman, left the magazine. He has joined the staff of Eight Star Diamond Co. in Santa Rosa, Calif. — Hedda T. Schupak

Gucci Buys Boucheron, Retakes YSL Licenses

The Gucci Group, an Italian luxury goods firm, has bought Boucheron, a 142-year-old Parisian luxury watchmaker and jeweler, from Schweizerhall Holding AG, a Swiss firm. The purchase, announced May 23, strengthens Gucci’s position in the upper segment of the fine jewelry and watch market.

Boucheron began distributing its elegant luxury timepieces ($1,800 to $35,000 retail) to select fine jewelers in 1999 and has plans to distribute its jewelry, too. With Gucci as its new owner, those plans will be strengthened and speeded up, say Boucheron officials. “Gucci will bring a lot of energy to the brand and the financial means for us to promote and grow the brand more quickly, both in the United States and worldwide, than we could otherwise,” Kari Allen, vice president of sales and marketing for Boucheron USA, tells JCK.

The Boucheron purchase is the latest in a series of high-profile acquisitions of top-name upscale watch brands by Gucci and its competitors (the luxury goods conglomerate LVMH and the Vendôme Group, both in Paris, and the Swatch Group, based in Switzerland).

Gucci, headquartered in Italy, also tightened control over its brands this month by buying back all Yves Saint Laurent (YSL) licenses, including those held by Cartier International, to sell YSL-branded watches and jewelry.

Gucci’s fiscal 2000 sales tallied $1.2 billion, an 18% gain, and were up 27% in the first quarter of fiscal 2001. But company officials say the Boucheron purchase, plus restructuring charges from takeovers in 1999, will force the firm to revise downward its year-end profit predictions.—William George Shuster

FTC Issues Guidelines for Internet Ads

The Federal Trade Commission’s consumer protection rules—including those for jewelry and gems—apply to ads and sales on the Internet as much as they do to print and electronic media, according to a new FTC report. “Fraud and deception are unlawful no matter what the medium,” says the FTC working paper, entitled “Dot Com Disclosures: Information About Online Advertising.” The report, released this month, doesn’t offer new rules for online advertising but states how existing rules apply to it.

Cecilia Gardner, executive director of the Jewelers Vigilance Committee, calls the working paper “very significant” for two reasons. First, FTC is “putting everyone interested in selling on the Internet on notice,” she says. “It gives specific guidance on how ads and disclosures must be made to avoid deception and comply with the FTC.” Second, FTC cites several examples from the jewelry industry, which indicates widespread use of the Internet by jewelry sellers.

JVC has monitored hundreds of jewelry Web sites for compliance with FTC rules and finds that “nine out of 10 who don’t comply are unaware of what [the FTC requirements] are,” Gardner tells JCK. She discussed the FTC paper and regulations at The JCK International Jewelry Show in June and will address the issue again at the JA New York show, which begins July 30.

The FTC paper is available online at www.ftc.gov/opa/2000/05/dotcom.htm. — William George Shuster