UpFront

A JEWEL of a YULE for ’96

Jewelry was a strong seller this Christmas season, though overall sales were softer than most retailers expected.

U.S. retailers across all product categories expected Christmas ’96 to be a success, based on a generally strong economy and high consumer confidence levels. However, retailers overall reported only modest gains over Christmas 1995 as debt loads kept consumer spending on the conservative side.

Jewelry was one of the bright spots in the holiday shopping season. A JCK poll of jewelers across the nation found most were pleased with their holiday sales. In fact, many reported gains of more than 14%.

Some jewelers, such as Norman Turgeon of Turgeon & Raine Jewelers in Seattle, Wash., said that even though holiday gains were lower than expected, sales growth for the year as a whole was still good. Conversely, jewelers such as Nick Greve of Carl Greve Jewelers in Portland, Ore., reported a spectacular December (Greve’s sales were up 29.3% over December ’95), but said overall sales gains for the year were in the single digits.

The International Council of Shopping Centers, in its annual post-Christmas survey of 500 mall-based jewelers, found jewelry sales were 4.8% higher between Thanksgiving and Christmas despite five fewer shopping days than in the same period of 1995.

“We expected fine jewelry would do well because of the strong economy and consumer confidence,” said John Kornarski, vice president of the ICSC. He suggested the record-setting stock market of 1996 and lower platinum and gold prices helped to propel sales, as did price promotions by many jewelers in the ICSC survey.

A separate ICSC survey of jewelry stores in 500 malls nationally found sales up 6.4% for 1996 through Nov. 30. Kornarski said sales of “real jewelry” got a boost from the marketing efforts of retailers such as Kmart, whose tennis bracelet promotions featuring comedian Rosie O’Donnell created demand that overlapped into fine jewelry stores.

On the opposite end of the retail spectrum, the ongoing trend toward luxury continued. Tiffany, for example, reported a 13% sales increase in its U.S. stores for November and December and 17% growth in its international stores. The company had increased its direct-marketing and catalog efforts as well as corporate sales to U.S. businesses.

At Asprey in New York City, Colleen Caslin, senior vice president of marketing, reported strong demand for luxurious merchandise. Jewelry sales were strongest in the $2,000-$5,000 range, and the entire category of cuff links went “through the roof,” she said, especially cigar cuff links retailing for $180.

Zale Corp., the nation’s largest jeweler, reported a respectable 9.4% increase in December sales.

If there was a favorite gem for the season, it was the diamond, said Ed Bridge, president of the Seattle-based Ben Bridge Jewelers. “Diamonds were particularly strong,” he said. “Anything that had to do with ears, wrists or necks – pendants, earrings, necklaces, bracelets – did well.”

Helene Fortunoff of Westbury, N.Y.-based Fortunoff’s, called diamond stud earrings and all diamond necklaces – especially solitaires and anniversary necklaces – “real standouts, with excellent, excellent sales.” Frank Yanke, a custom jeweler in Franklin, Mich., sold “lots of diamonds, way more than in 1995.” And Gary Gordon said his store, Samuel Gordon Jewelers in Oklahoma City, Okla., sold large important diamonds, medium-sized diamonds and lots of designer jewelry.

For Dan Moyer of Moyer & Co. Fine Jewelers in Carmel, Ind., designer goods sold well while non-designer goods did not. Big sellers across the nation included nationally known designers such as David Yurman and Lagos, but also avant-garde designers such as John Hardy.

In selected areas, colored gems sold well, but they didn’t appear to have the overall popularity of diamonds. Cindy Calderon of Smith Jewelers in Redlands, Cal., sold a good deal of big colored stone jewelry and big-ticket Tahitian black pearl jewelry. Elizabeth Parker of Curt Parker Inc. in St. Louis, Mo., said 34% of her sales were pearls, which she attributed to advertising focused on the product category. Emerald and ruby sales were up too.

Many jewelers found good success with radio advertising, though jewelers such as Gordon, Steven Tapper of Tapper’s in West Bloomfield, Mich., and Susan Eisen of Susan Eisen Fine Jeweler in El Paso, Tex., said the holiday ads were the culmination of consistent year-round campaigns.

RUSSIAN OFFICIALS RETHINK PROPOSAL FROM DE BEERs

Russian officials in January retreated from their tough stance against a proposed rough diamond marketing contract with De Beers.

At press time, reports from the ITAR-TASS news agency said Russian officials planned to sign the agreement by the end of January. Under the proposed agreement, Almazy-Rossii-Sakha would be the Russian signatory to new distribution agreement.

Russian Finance Minister Aleksander Livshitz ordered the urgent preparation of the documents needed for the deal, ARS Vice President Lev Safonov told ITAR-TASS.

This promised agreement capped a month of turmoil and uncertainty regarding the deal between Russia and De Beers. On Dec. 16, Livshitz announced an agreement with De Beers could not be signed in its then-current form. The problem, he said, was that the proposal did not take all the needs of the Russian cutting industry into consideration.

That announcement scuttled negotiations that were due to start the next day between the two sides in London. On Dec. 18, De Beers announced it would not buy Russian rough after Dec. 31 without a signed agreement, and key Russian officials declared they would not sign such a deal.

However, at a Kremlin briefing on Dec. 19, Sergey Yastrzhembsky, Russian press secretary, said the basic provisions of a Memorandum of Understanding that both sides signed in February 1996 would be retained. The memorandum outlined the framework for a new sales agreement and called for De Beers to buy $1.2 billion worth of Russian rough each year.

De Beers reveals plans for 1997

De Beers will spend a record $200 million – and maybe more – this year to advertise diamond jewelry worldwide, adding campaigns in the Middle East and East Asia while continuing support in traditional markets. Nicky Oppenheimer, chairman of De Beers’ Central Selling Organisation, offered that information in his annual New Year’s address.

“Overall, we expect that world retail sales in 1996 will have exceeded those of the previous year,” he said. “This is a good platform on which to build in 1997.”

De Beers’ marketing and ad plans are integral elements in its strategy to raise diamond demand. Oppenheimer said the industry faces a positive future based on sound fundamentals. He described 1996 as a “year of contradictions,” with the CSO showing an all-time sales record of $4.8 billion tempered by real and threatened breaks with Argyle and Russia. “One of the problems of 1996 was a growing polarization in the market,” he said. “Strong demand and a rising level of confidence in medium to larger goods was offset by eroding prices in the cheaper end of the market.”

Oppenheimer vowed to “defend Indian clients” in the cheaper end of the market, protecting business “though flexibility and sensitivity in our sales allocations.” Oppenheimer reiterated his disappointment that Australia’s Argyle operation declined to renew its rough diamond marketing contract in 1996, saying the “final proposal would have been seen in the best interest of both sides and the diamond market.”

He said he is confident De Beers will remain the most influential force in the diamond industry. Its South African mines produce at least 50% by value of the world’s diamond output, and Botswana recently renewed its CSO contract for five years. “It’s an indication of our confidence in the future that [Botswanian partner] Debswana recently announced a doubling of capacity at its Orapa Mine,” he said. “It is also worth noting that De Beers’ other world-class mines – Venetia in South Africa and Jwaneng in Botswana – have the capacity to increase production if demand increases.”

OYSTER DEATHS MAY LOWER THIS YEAR’s PEARL CROP

The Japan Fisheries Agency is investigating why more than 148 million oysters died last year, threatening a decrease of up to 50% in the country’s cultured pearl harvest this year. The Japan Pearl Exporters’ Association estimates the loss at $15.6 million.

The oyster deaths occurred in Uwa Bay in Ehime Prefecture, where about 70% of Japanese akoya pearls are produced. They died after fishermen, who share the bay area with pearl cultivators, released formalin (the liquid form of formaldehyde) into the water to kill parasites on their fish. However, investigators suspect the oysters were already weakened by other conditions to be affected so dramatically by the chemical.

Some smaller producers fear the crop failure may drive them out of business. In addition, JPEA predicts a 10% increase in prices over the next two years, especially in medium- to high-quality goods.

Reserves of producers and wholesalers should back up pearl supply, and Chinese akoyas will prevent shortages in low-end goods, says Devin Macnow of the Cultured Pearl Information Center. Also, Japan, which traditionally consumes 50% of the cultured pearls it produces, is still in recession, which may leave more pearls for export.

Surprisingly, JPEA reports that during the recent “best of the best” contest to judge the best-quality cultured pearls of the new crop, Ehime cultivators found some of their best cultured pearls ever in the surviving oysters. “The ones that survived are producing really wonderful pearls,” says Macnow.

RUSSIAN DEVELOPS SYNTHETIC AMETRINE

Commercial quantities of synthetic ametrine have been created by Vladimir Balitsky of the Institute of Experimental Mineralogy of the Russian Academy of Science in Chernogolovka, Russia.

Natural ametrine is a form of quartz, color-zoned to show purple (amethyst) and yellow (citrine). Balitsky confirms that he has created a synthetic version and says he can produce 10 kilograms monthly, though that could increase as much as tenfold given the proper demand and market. (Balitsky also is credited with producing other unusual synthetics, including turquoise and malachite.) The ametrine is produced in crystals eight to 10 inches long.

How the synthetic ametrine is produced is being held secret, but Balitsky says it will sell for $300 per kilogram wholesale. His company is looking for U.S. distributors and will exhibit the material at the Tucson Gem and Mineral Show this month.

Natural ametrine has been found in commercial quantities only at the Anahi mine in Santa Cruz, Bolivia. The development of a synthetic counterpart raises questions as to how consumers (at the wholesale and retail levels) will be able to tell the difference.

Balitsky, who is preparing an extensive report for an as-yet-unidentified gemological journal, says detection is difficult but possible because of features in the orientation of the color zones and the gas and liquid inclusions.

George Rossman of the California Institute of Technology in Pasadena visited Chernogolovka and saw the synthetic ametrine. He reports the color zoning in the synthetic crystal is not in the normal “radiation symbol pattern” found in the natural material. However, the cautionary moment is once the crystal has been cut, showing two convincing ametrine colors with a sharp division of color in the center of a single gemstone. This is where gemologists might have the greatest challenge in separating the genuine from the synthetic.

CAREY RESIGNS AS HEAD OF TOWN & COUNTRY

C. William Carey resigned Jan. 3 as chairman of Town & Country Corp., Chelsea, Mass., a company he founded 41 years ago. The resignation comes as part of a year-long restructuring of the company.

William Schwabel, a board member for three years, was named acting president and cochairman. A former executive at Gillette Co. and former president of Braun North America, Schwabel says he will continue to streamline operations with the aim of long-term competitiveness and profitability. (Charles Hill, a director since 1984, is the other chairman.)

Carey will continue to help Town & Country with special projects and with the disposition of non-core assets. He has formed a new, yet unnamed, company in Boston that will work primarily on real estate sales connected with the recent sale of Town & Country’s Balfour division and with Solomon Brothers, a Caribbean retailer that is part owned by Town & Country.

Town & Country will make severance payments of about $3.9 million under Carey’s employment agreement and will continue to lease its headquarters building from Carey’s company, Carey Realty Trust. Carey also remains one of Town & Country’s largest stockholders. “I have been proud to be associated with Town & Country for so many years,” he says. “It has been the focal point of my professional life. But now, after having assisted the company in the sale of its Balfour operations, and as the company is restructuring itself for the future, it is appropriate that I depart.”

WITTNAUER MANAGEMENT LEADS BUYOUT

The president and three other executives of Wittnauer International joined with a St.Louis-based investment group to buy the watchmaker from Westinghouse Electric Corp., its owner since 1969.

The buyout, completed in mid-December, allows Renny Swift, Wittnauer’s president, and his management team to continue the new product lines and marketing strategies that began in 1991 when Swift took over.

Those who joined Swift in the buyout are Chief Financial Officer Gene Karpovich, Vice President of Operations Ron Giraldi and Vice President of Sales Bob Mazzone. The team raised $25 million from banking sources to complete the buyout of the New Rochelle, N.Y., company, Swift says. Financial backing from Composite Holdings LLC, St. Louis, the new majority owner, wasn’t disclosed.

Swift says Composite Holdings will not be involved in the company’s day-to-day operations, allowing his managers to proceed with their plans with greater financial independence than was possible under Westinghouse. No changes are planned in the company’s New Rochelle staff, its Toronto office (distribution headquarters for Baume & Mercier to Canada) or its manufacturing plant in Cayey, Puerto Rico.

Swift expects to make immediate increases in the company’s advertising and marketing efforts. “This year we’ll spend more than we have in at least 10 years on advertising,” he says.

CORRECTION

A story in JCK, December 1996, p. 140, about the purchase of certain assets and trade styles of Pacific Gem Cutters by Carl K. Gumpert Inc. contained two misspellings. The president of Carl K. Gumpert is Walter Feinblum. The head of Gumpert’s Pacific Gem Cutters division is Armand Duschinsky.

MICHAEL ANTHONY & OROAMERICA: NO MERGER

Merger talks between Michael Anthony Jewelers and OroAmerica have come to a close without an agreement.

The merger, which would have created the largest gold jewelry manufacturing company in the U.S., was derailed as disagreements emerged over the value of Michael Anthony shares.

The cash agreement called for Michael Anthony to pay OroAmerica $6 per share (about $36 million) plus $1.50 per share in stock equity. The total proposal would have equaled nearly $47 million. However, neither side could agree on the net worth of Michael Anthony’s equity proposal.

Michael Anthony, based in Mount Vernon, N.Y., says it will continue to pursue other possible acquisitions. OroAmerica, Burbank, Cal., says it will focus on profitability and not seek other merger possibilities.

BERGER BUYS GRUEN ASSETS

At press time, M.Z. Berger, a watch manufacturer in Long Island City, N.Y., bought the assets of Gruen Marketing Corp., a watch company in New York, N.Y. See the March issue of JCK magazine for more details on the acquisition.