Small Sight Allocations in September
Liquidity problems in some diamond cutting centers, the worsening economic climate in the Far East, and a saturated American market caused De Beers’ Central Selling Organisation to slam its slight allocations into steep reverse. The September sight was reportedly $325 million, about $100 million below August’s and a similar amount under the September 1997 allocation. De Beers spokesman Robin Walker, while declining to elaborate, says the small sight was “in response to market conditions.”
Lorenzi Diamonds, one of Israel’s largest diamond firms, reported difficulties in meeting its payment obligations. This has unsettled bankers and dealers alike. The markets in Asia continue to languish with the specter of deflation hanging over some, while floods in India have crippled that country’s diamond-manufacturing industry temporarily.
Even the welcome announcement of an impending agreement between De Beers and Russia has been compromised by the large parcels of Russian smalls – so-called technical goods that have shown up in Antwerp recently as the country tries to raise funds.
American sightholders say they were disappointed by both the size of their allocations and the quality offered.
By all accounts, the CSO wanted to increase its sight allocations during the final part of the year to ease the rough shortages that are beginning to plague the world’s diamond centers. But there is no way it can do so.
August’s sight was about $425 million to $440 million, slightly smaller than July’s, the year’s largest at $450 million.
Allocations to Israel reportedly were cut over concerns about increasing the industry’s debt level while the allocation of medium to better qualities to Indian manufacturers was cut sharply.
“The market simply isn’t ready for them,” says one broker, noting they are traditionally an Asian item. – Russell Shor
De Beers Branding Test Going Well, Executives Say
De Beers’ first test of its branded stones at a three-store chain in Manchester, England, is surpassing expectations, executives say. “It’s doing very well,” says Derek Palmer, regional director of Western markets, who is overseeing the plan. So far, all the signs are positive. The stones are inscribed with the name “De Beers” and an individual security number.
Palmer says the company hasn’t decided whether it will roll out branded stones worldwide. “We haven’t seen how the stones will do at Christmas,” Palmer says. “It probably won’t be until next January or February that we make a final decision.”
De Beers also has talked to sightholders about a special limited-edition group of diamonds that will mark the millennium. These stones also may be inscribed, although it is possible that they will use a process different from that being used in branding. Nothing definite has been set for this project, either, according to Palmer. – Rob Bates
Little Switzerland Weathers Hurricane Georges
Hurricane Georges wreaked devastation throughout the Caribbean in late September, but for the most part spared the 25-store Little Switzerland jewelry chain. Only the St. Kitts store suffered major damage – it will be closed indefinitely. The other 24 stores on 10 Caribbean islands merely sustained minor water damage, according to the firm. Even though only one of the stores was severely hurt by the storm, Little Switzerland estimates the hurricane will cost it $2.2 million to $2.7 million in lost revenues.
Shortly after Georges moved beyond the Caribbean, leaving 300 fatalities in its wake, C. William Carey, acting chief executive officer of Little Switzerland, said, “Much of our ability to ride out the storm is attributable to the dedication and hard work of our employees, who implemented our hurricane preparedness plan in an outstanding fashion.”
Little Switzerland was active in Caribbean relief efforts, delivering food, water, and other necessities via chartered planes. – Jessica Stein Diamond
Sterling Powers Big Signet Gains
The Signet Group plc posted a 7% rise in comparable store sales and a 50.8% gain in operating profits for its fiscal half year ending Aug. 1. That was thanks “almost entirely,” to Sterling Inc., its U.S. division, according to a company report. Sterling provides 65% of Signet’s sales.
At the same time, the London-based firm reduced its net debt by $116 million (to $237 million), leading to a 35% reduction in interest charges. All in all, the half year was “another significant step forward” for the firm, according to chairman James McAdam. Signet posted its first profit only last year, after struggling back from several years of corporate and financial reorganization. The company is even considering reinstituting a quarterly dividend, which was last paid in 1992.
Sterling itself posted a 10.7% gain in half-year sales (to $426 million) and a 10.4% increase in sales for comparable stores (i.e., those open for the same length of time). Its operating profit soared 38.8% to $36.3 million.
Sterling plans to open 23 mall stores, close 11 others, remodel 20, and relocate 17 in this fiscal year (ending Jan. 31). It has targeted retail opportunities in more than 100 malls, according to Sterling president Terry Burman, and expects to “open up” about 25 malls annually in the next few years.
Its Jared superstores – five times larger in size and inventory selection than average mall stores – continue to be a major means of growth. “This is an unexploited jewelry format,” says Burman. “No other chain is developing this, and we have the capital and infrastructure to do so.” The firm had seven Jareds open at the start of the current fiscal year and expects to add eight more in the West and South by Jan. 31, 1999, and another 12 by early 2000. Sterling has identified more than 100 potential markets that can support one or more Jared stores. – William George Shuster
JewelWay’s Woes Worsen
JewelWay International, a nationwide jewelry network marketing firm, has filed for financial reorganization under Chapter 11 of the federal bankruptcy code. The petition was filed in July. Officials of the Tucson, Ariz., firm couldn’t be reached for comment.
Last June, JewelWay was sued for misrepresentation by the Federal Trade Commission, which alleged the firm was operating a pyramid scheme in which its promotional efforts focused primarily on recruiting rather than on sales.
According to the FTC, the firm promised lucrative earnings and benefits as an inducement to consumers to make token jewelry purchases and to become
JewelWay representatives who would then recruit additional participants. Consumers paid about $1,000 to join.
In July, JewelWay agreed to work out a settlement with the FTC. It agreed to change its training, develop a policy for refunds on returned jewelry, verify sales figures to the FTC, and rewrite its materials so that its representatives wouldn’t exaggerate what one could earn from selling jewelry.
In November, several officials of JewelWay were required by the FTC, under terms of the agreement, to repay $5 million to about 150,000 consumers who had earned no money from their investment. However, the agreement didn’t include any admission of guilt, and the company was allowed to continue to operate.
JewelWay had been touted as one of Inc. magazine’s 500 fastest-growing companies in 1996, when its sales totaled $110 million. – William George Shuster
Crescent Gets New Name
A new name has been selected for Crescent Jewelers of Los Angeles, after a naming contest that attracted nearly 2,000 entries. The jeweler agreed to change its name after a settlement with Crescent Jewelers of Oakland, Calif.
The firm’s new name, Sarah Leonard Fine Jewelers, was selected to recognize the jeweler’s founders, who are better known by their nicknames, Sunny and Lenny Friedman. The jeweler also changed its marketing tag line, which appears on the front of
the store as well as on promotional materials, from “Serving the community since 1946” to “Our family serving the community since 1946.”
With funds from the settlement, the renamed jeweler has mounted a marketing campaign to announce its new name that will appear in the Los Angeles Times and several Los Angeles area radio and television stations. – Jessica Stein Diamond
$20 Million Boost for Silverman’s
Henry Silverman Jewelers, a chain of 30 stores headquartered in El Paso, Texas, will be aided in its expansion efforts by an infusion of $20 million from Paragon Capital of Needham, Mass., an asset-based lender specializing in secured lending to retailers. Paragon Capital is a partnership between its affiliate, the Ozer Group LLC of Needham, a “boutique” asset valuation firm, and Foothill Capital Corp. of Los Angeles, an asset-based lender that’s a subsidiary of Norwest Corp. of Minneapolis-St. Paul.
The arrangement, announced in late September, will “give us funding that allows us to go out and purchase some more stores [as well as] build a couple of stores from scratch,” says Silverman CEO Stuart Fetter.
In June 1997, previously unrelated Silverman Jewelers Consultants of Mount Pleasant, S.C., purchased a controlling interest in Henry Silverman Jewelers, a chain of factory showroom stores. Fetter, who previously headed the consulting firm, became chairman and CEO of both companies. Since then, he has expanded the jewelry chain from 18 stores in 10 states to 30 in 12 states and added a guild division (JCK, October 1998, p. 138). Fetter tells JCK that by Christmas he hopes to acquire four additional stores, including two guild stores.
Fetter says Paragon is an appropriate lending partner because of its jewelry industry experience. Ozer Group president Mark Stein formerly worked in the industry.
Rob Shusterman, chief credit officer at Paragon, says “a big attraction” for his firm was Fetter’s reputation as “one of the premier consultants in the jewelry industry” and “the growth aspirations that he has” for the factory showroom stores. He notes that Fetter’s plan for the guild division is “not something that we really focused on, [but] it’s certainly another attractive aspect of what Mr. Fetter’s doing. He has a lot of great ideas.” – Barbara Spector