Moissanite manufacturer Charles & Colvard saw decreased sales but a narrower loss in its second quarter, as it announced the arrival of a new colorless gemstone.
The company’s sales in its second quarter (ended June 30) totaled $7.5 million, a 5 percent decrease from last year’s $7.8 million. It recorded a $4 million loss, an improvement over last year’s loss of $6.2 million.
In a conference call following the release of its financial results, CEO Marvin Beasley said the company had introduced colorless moissanite, which it calls Forever One, at JCK Las Vegas this year. (In its 10-Q, the company defined colorless as from D to F on the color scale. Forever Brilliant stones are G, H, and I colors, it said, while classic moissanite, which will soon be renamed Forever Classic, comes in at J or K.)
Beasley said the company will introduce the new product slowly so as not to cannibalize existing inventory.
“I remember very well the launch of Forever Brilliant, and we, quite frankly, had some issues and some problems in that launch,” he said. “We tried to learn from that and not make the same mistakes again. And that’s why you heard me say that this is very calculated: We polished fewer shapes, sizes. We selected a group of 8 to 10 large partners, we really wanted to control this from day one, very, very carefully.”
The new product will carry a premium, he added, because otherwise “everyone would move to it overnight.”
Traditional moissanite will fade away in time, he said.
The company’s exclusive patent for moissanite expires in September, and Beasley said he is “not cocky” about it.
“We all here take it seriously,” Beasley said. “We have not seen a great deal [of product]. There are one-offs, and we see those popping up on eBay and places out of China and out of India. We do not hear from any of our business partners that they’ve seen much as well. That doesn’t mean that on Sept. 2, we won’t see more, but, quite frankly, due to the nature of this kind of thing, I think we would have seen it long before now. We feel a little better than we did about this situation.”
Beasley said that he has heard about “a lot of cheating” in India, such as people mixing in Forever Brilliant moissanite with diamonds and falsely engraving Forever Brilliant on some stones.
Beasley said the company had some success in depleting its inventory, which stood at $34.5 million in the second quarter, down from $38.9 million last year. It recently sold $2.2 million of lower-grade jewels to one customer at 5 percent below cost.
Charles “Chuck” Lein, the former chief operating officer of Stuller who once sat on the Charles & Colvard board, appeared on the conference call as a private investor. In addition to asking a question about expenses, he congratulated the company for liquidating product.
“One of the things that plagues the jewelry industry [is] people fall in love with their inventory,” he said. “You guys are doing exactly the right thing.”
Other highlights from Charles & Colvard’s second-quarter operating results:
– Its home-party business, Lulu Avenue, grew by 355 percent for the quarter to $1.3 million. It now represents 17 percent of sales.
– Sales at its direct-to-consumer e-commerce business, Moissanite.com, jumped 78 percent to $1.3 million. It also represents 17 percent of sales.
– Finished jewelry sales totaled $3.7 million, compared with $3.8 million last year. Loose jewel sales came in at $3.8 million for the quarter, compared with $4 million last year.