Charles & Colvard’s Fourth Quarter Moissanite Sales Rose 3%

Charles & Colvard, Ltd., global source of moissanite, reported that its fourth quarter net sales increased 3 percent to $12.1 million, compared to the prior fourth quarter. Gross profit for the quarter, ended Dec. 31, 2006, increased 11 percent to $9.3 million. Gross profit margins increased to 76.9 percent in the fourth quarter of 2006, from 71.9 percent in the comparable quarter of 2005, primarily as a result of improved production costs during the period being relieved from inventory.

Operating income for the three-month period increased 39 percent to $1.9 million, the Morrisville, N.C. company reported. Net income for the quarter increased 42 percent to $1.3 million.

Charles & Colvard’s domestic sales in the fourth quarter increased 1 percent to $11 million compared to the fourth quarter of 2005. International sales for the fourth quarter increased 31 percent to $1.1 million, with strong results from all key geographic regions. Total shipments of 69,700 carats for the current period were 1 percent more than the 68,900 carats shipped in the same period of 2005. Shipments of carats in the U.S. decreased 1 percent while international shipments of carats increased 32 percent.

“Our sales increase was attributable to the additional number of doors that sold moissanite jewelry in the fourth quarter,” said Bob Thomas, Charles & Colvard president and chief executive officer. “We believe the strength of our overall sell-thru levels were negatively impacted as some of our leading department store chains and mall jewelry retailers increased prices of moissanite products which led to a slower number of product reorders in the fourth quarter.”

As of Dec. 31, 2006, total inventory (including consignment) increased by $1.9 million compared to the end of the third quarter of 2006 and by $8.9 million compared to Dec. 31, 2005.

“We continue to work aggressively to add new points of distribution and believe these efforts will result in continued improvement to our business,” Thomas said. “We added approximately 270 doors in the fourth quarter of 2006 primarily from Kohls, Zales Canada, and Sears.”

The company said it expects fiscal 2007 net sales to be in the range of $49 to $51 million, with some modest revenue growth in the first half of its fiscal year, primarily in the second quarter. It said it expects much stronger revenue growth in the second half of the fiscal year as sales are expected to ramp up at Kohl’s, Sears and other retailers accelerate their rollout to prepare for the holiday selling season. The company believes that gross profit margins will remain in the range of 65 percent to 75 percent and that full year marketing and sales expense will be in the range of approximately 36 percent to 41 percent of total net sales.