Harry Winston First Quarter Sales Up 10%
Harry Winston Diamond Corp. reported an increase in consolidated sales for the first quarter, ended April 30, of 10 percent, generating an 18 percent increase in gross margin and a 10 percent increase in consolidated earnings from operations compared to the results of the first quarter of the prior year.
Consolidated quarterly sales for the luxury retailer and diamond mining company totaled $156.1 million with earnings from operations of $39.6 million compared to $141.4 million and $36 million, respectively, for the comparable quarter of the prior year.
Net earnings were $21.3 million, compared to net earnings of $3.3 million in the first quarter of the prior year. Net earnings for the comparable quarter of the prior year were reduced by a net $13.3 million foreign exchange loss as a result of the strengthening of the Canadian dollar relative to the U.S. dollar during the quarter, compared to a net $200,000 foreign exchange gain in the current quarter.
Earnings from operations for the mining segment increased 13 percent to $42 million compared to the comparable quarter of the prior year. Extreme cold temperatures, compounded by the mining of a lower-grade section of the A-154 South ore body, caused a 31 percent decrease in carat production, with 0.7 million being produced in the quarter versus 1.0 million for the comparable quarter of the prior year. Mining sales, however, were down only 2 percent to $81.4 million as higher diamond prices compensated for reduced volume.
The retail segment recorded a 27 percent increase in sales to $74.7 million. However, a $2 million non-recurring expense related to restructuring and improvements carried out at the Geneva watch factory resulted in the retail segment recording a loss from operations of $2.4 million. Excluding the impact of the restructuring charge, loss from operations would have been $300,000 compared to a loss of $1.1 million in the comparable quarter of the prior year.
“This quarter has delivered improved operating results in both of our business segments despite a rough diamond production shortfall and a troubled economy in the principle diamond retail market of the US. Robust pricing continues for the white rough diamonds that are the signature of the Diavik Mine as production shortfalls meet increased demand from emerging economies,” said Robert Gannicott, Harry Winston chairman and chief executive officer. “Our jewelry business has turned in exceptional sales growth, principally from global customers beyond the US, as we continue to improve both revenues and costs in this truly global brand,”
Thomas J. O’Neill, Harry Winston president added, “First quarter sales in our retail segment were particularly strong as our strategy to build market share through a growing network of salons and strengthening our watch business progressed. Although gross margin was impacted by high value individual sales at lower margins, this was mitigated by lower SG&A as a percentage of the increased sales base. Transactions to Asian, Russian and Middle Eastern clients more than offset the decline in the US and continue to grow as a proportion of our business. We look forward to a year of continued sales growth and improved profitability.”
Harry Winston Diamond Corp. is a specialist diamond enterprise with assets in the mining and retail segments of the diamond industry. The company supplies rough diamonds to the global market from its 40 percent interest in the Diavik Diamond Mine, located in Canada’s Northwest Territories. The company’s retail division, Harry Winston, Inc., is a premier jewelry and timepiece retailer with salons in key locations including New York, Paris, London, Beijing, Tokyo, and Beverly Hills.