Jan 10

U.S. Chain-Store Sales +3%

RAPAPORT… U.S. chain-store sales rose 2.8 percent year on year, according to the International Council of Shopping Centers (ICSC) and Goldman Sachs. However, retail sales fell 5.4 percent for the week that ended on January 7, as compared with the previous week.

ICSC also noted that the week-to-week sales drop was the largest decline since records began in September 1989.

”January is a low sales volume month and small shifts can be accentuated, which is the case in the first week of the January fiscal month,” said Michael Niemira, ICSC’s vice president of research and chief economist. ”The slowdown was intensified by the abnormally warm weather across the country which softened the demand for seasonal goods on a week-over-week basis,” added Niemira.

ICSC Research anticipates that January’s comparable-store sales will increase by 2 percent to 3 percent.

Jan 10

Tiffany’s Christmas Sales +7% Despite Weaker E.U., U.S. Comps

RAPAPORT… Tiffany Co. reported that worldwide Christmas-season sales rose 7 percent year on year to $952 million for the two months that ended on December 31. But on a  constant-exchange-rate basis, worldwide net sales rose 6 percent and comparable store sales increased 4 percent. Tiffany also lowered its earnings guidance slightly from an earlier estimate in November.

By region, Christmas-season retail sales rose 4 percent to $503 million and same-store sales rose 2 percent across the Americas,  which include the U.S.,  Canada and Latin America. Sales fell 1 percent at Tiffany’s New York flagship store.

But the bright spot in Tiffany’s report came from the Asia-Pacific region where sales jumped 19 percent to $165 million and comparable-store sales increased 12 percent.  In Japan, sales increased 13 percent to $160 million and same-store sales rose 6 percent.   Sales in Europe increased 1 percent to $117 million with same-store sales declining by 4 percent.

Michael J. Kowalski, the chairman of Tiffany, said, ”After achieving very strong and better-than-expected sales and earnings growth in the first three quarters of 2011, sales weakened markedly in the United States and Europe during the holiday season, reflecting restrained spending by consumers for fine jewelry. We are now estimating that earnings per diluted share for the fiscal year ending January 31, 2012 will increase 23 percent to 25 percent to a range of $3.60 to $3.65. This estimate compares with a prior forecast made in November of $3.70 to $3.80 per diluted share and our initial fiscal 2011 outlook provided last March of $3.35 to $3.45 per diluted share. All estimates do not include $0.20 per diluted share of nonrecurring expenses.”

He added, “We are in the preliminary stages of financial planning for 2012 and will provide more detailed guidance when we report our full year financial results in March. We remain confident of our ability to expand our worldwide presence, to serve the growing global demand for Tiffany Co. products and to achieve a solid rate of annual growth in sales and earnings in 2012 despite economic challenges.”

 

Jan 10

Zale’s Christmas Season Sales +6%

RAPAPORT… Zale Corporation reported that revenue for the November and December Christmas holiday period rose 5.8 percent year on year to $564 million, but the figure included approximately $10 million resulting from the change in warranty revenue recognition.  Zale’s comparable-store sales increased 5.9 percent for Christmas season, compared with an 8.5 percent rise one year ago.  For November, same-store sales rose 10.1 percent, but in December the increase was only 4.2 percent.

Zale reported that comparable-store sales for Zales Jewelers, Zales Outlet and Gordon’s Jewelers rose 9 percent year on year, which was an improvement from only a 7.5 percent increase in Christmas season 2010.

In Canada, Peoples Jewellers and Mappins Jewellers had an increase in comparable-store sales of 1.7 percent at a constant-exchange rate, following  a 10.2 percent increase in 2010.

Kiosk Jewelry sales for Zale fell 2.1 percent this Christmas season, whereas one year ago kisok revenue rose 4.2 percent on a same-store basis.

Zale will end its fourth quarter on  January 31, and it expects that gross margin will “be consistent with the prior year quarter’s gross margin of 50.3 percent.” Operating margin is expected to be slightly below the 7 percent rate of 2010 due to higher selling, general and administrative expenses primarily driven by the holiday advertising campaign and marketing for the launch of proprietary products.

 

Jan 10

Sara Yood Joins JVC as Asst. General Counsel

RAPAPORT… The Jewelers Vigilance Committee (JVC) appointed Sara E. Yood  as assistant general counsel, a role where she will focus on trademark monitoring, Federal Trade Commission review of the jewelry industry guides and general legal support.  Yood held several positions in the private sector, including the digital music, intellectual property and publishing industries. She graduated Fordham University School of Law with honors and is awaiting admission into the New York State and New Jersey Bars. 

Additionally, JVC promoted Suzan Flamm to senior council. Flamm joined JVC in January 2008 as assistant general counsel and she conducts mediations, researches legal issues and drafts legal compliance tools, such as the new Jewelers Employment Manual, articles and case studies for trade publications and JVC’s website.  
 
JVC’s president, Cecilia Gardner, said, ”Yood brings solid legal expertise and experience to JVC; we are excited to have her onboard. With this new position, JVC hopes to expand the trademark monitoring services we provide to the industry. Yood and Flamm’s combined legal backgrounds and understanding of JVC’s mission and goals will enhance JVC’s ability to help U.S. jewelers to fulfill their legal compliance obligations.”

Jan 10

Elizabeth Taylor’s Gems to Be Auctioned at Night

For a sign of how much Christie’s is banking on the sale, one has only to note that it is scheduled for the evening of Dec. 13.

While many important art auctions take place in the evening, only a handful of jewelry auctions are scheduled after dark, when they generate more glamour and excitement. For example, Sotheby’s Hong Kong sale of “magnificent” jewels in early October was scheduled for 5:30 p.m. At Christie’s and Sotheby’s, what distinguishes a jewelry sale as “magnificent” is generally price. Christie’s “magnificent” auctions have an estimated floor value of $50 million for all the pieces together, whereas its “important” jewelry sales have an estimated floor value of $15 million to $20 million, according to Rahul Kadakia, its head of jewelry. Often those estimates are low. At one recent sale in Hong Kong the estimate was $65 million in a sale that ultimately fetched $90 million, according to Mr. Kadakia.

Christie’s has put an estimate of $30 million on the sale of Elizabeth Taylor’s gems. But the auction house, which is promoting the sale around the world, clearly hopes the final figure will soar higher.

The Taylor collection is already on display at the Museum of Contemporary Art in Los Angeles, and Christie’s will host a series of cocktail events and dinners for guests as it tours the globe before the sale.

In the Taylor auction, as for all important auctions, some favored bidders get their own private viewing. For example, before the November 2010 Sotheby’s auction of important jewels in Geneva, Laurence Graff, owner of the Graff retail jewelry firm, recalled that Sotheby’s brought some pieces to his office so that he could view them privately. The visit paid off for Sotheby’s. Mr. Graff spent a record $46 million for one stone in that sale, generating worldwide headlines.

Clients can be demanding. Mr. Kadakia of Christie’s went to the home of an Asian client at 1 a.m. to show her a two-strand Baroda pearl necklace that was to be sold in an April 2007 auction. “She had just returned from a trip, and she called me to come over,” he said. “I went and she put the necklace on her daughter, who ran around on the marble floor.”

“My heart was in my mouth, because pearls are fragile and if they had fallen on the floor, it could have been over,” he said. They did not break, and two weeks later at auction the client paid $7.1 million for the necklace.

Only a few auction houses are rich enough to send their collections on the road. But even smaller houses are taking account of the growing wealth in the Far East and angling to promote their jewelry sales to that market. For example, in September when the gallery Doyle New York held its Asian week auction, which did not include jewelry, it nonetheless set up a jewelry counter at the gallery.

“The pieces for that exhibition were chosen with regard to what we thought the Asian buyers would be interested in purchasing with the hope that there would be some cross-pollination between the two categories,” said Louis Webre, the houses’ director of media and communications. “As a result we did have some telephone bids.”

It is a sign of the growing power in the Far East that Sotheby’s held both a magnificent jewels auction and a jadeite auction in Hong Kong. Geneva, which attracts a large global clientele, will hold a magnificent jewels auction and a “noble jewels” auction, which showcases jewels with a royal provenance. In London, as of late, there have only been important jewel auctions, according to Darrell Rocha, head of publicity at Sotheby’s. And a local brand-name celebrity generally sells best in her own market. Christie’s auctioned Princess Margaret’s jewels and those of Christine Onassis in London.


Jan 10

Zimbabwe: Official Lauds Diamond Trade Ruling

Zimbabwe’s mining minister vowed Wednesday that the country would “no longer be begging for anything from anybody” after international diamond regulators agreed to let it trade about $2 billion in diamonds from the Marange field, where human rights groups say miners have been tortured. Kimberley Process experts agreed this week to allow Zimbabwe to sell diamonds from the 140,000-acre field, in the country’s east, whose discovery in 2006 set off a chaotic diamond rush. The country has denied accusations of human rights abuses in the area, but it had been under sanctions since 2009 because of “significant noncompliance.” The Kimberley Process was set up in 2002 after brutal wars in Sierra Leone and Liberia that were fueled by so-called blood diamonds. Participant nations are now required to certify the origins of diamonds being traded, to assure consumers they are not financing war or human rights abuses.


Jan 10

De Beers Makes Anglo American a Better Merger Catch

Anglo, led by its chief executive, Cynthia Carroll, will take its 45 percent holding in De Beers to 75 to 85 percent, depending on whether the diamond mining company’s third shareholder, the government of Botswana, exercises its right to buy a quarter of the Oppenheimer stake. Factoring in about $1.1 billion of debt, the deal gives De Beers an enterprise value of at least $13.8 billion, or about 5.9 times this year’s Ebitda, or earnings before interest, taxes, depreciation and amortization (assuming that its Ebitda in the second half of the year matches the $1.18 billion made in the first half).

European metal and mining companies trade at about 5.2 times forward Ebitda, but De Beers surely merits a big premium, because it has as much in common with a steel maker as it does with a company like the jewelry retailer Tiffany’s, which trades on 11.9 times forward Ebitda. And like so many other deals, this one is partly predicated on China’s rising wealth. A bigger middle class equals more brides wearing diamond rings.

Anglo should also be able to save on central costs and procurement, and share more mining expertise. Some investors are doubtless also relieved at this sensible use of cash, occurring as the company prepares for an unwelcome multibillion dollar windfall in Chile, where the state’s copper giant is exercising an option to muscle into Anglo’s operations in exchange for a large payment to Anglo.

The deal fits well with Anglo’s long-running simplification, which has brought $3.3 billion of divestments recently in operations like zinc mining. And the more straightforward Anglo gets, the more attractive it could be if, say, Xstrata, a rebuffed suitor, ever decided to make another approach.

The Oppenheimers will plow the proceeds into new Africa-focused investments outside of diamonds. Ernest Oppenheimer’s involvement in the industry began in 1902. A century and a decade is good enough going.

Barclays’s New Tune

Robert E. Diamond Jr., Barclays’s chief executive, has discovered humility. Ten months after he declared that the period for banks to show remorse was over, he has acknowledged the need to rebuild trust. Though the change of tone is refreshing, he must now demonstrate that reality reflects the new ideal.

Mr. Diamond’s attempt to place banking in a broader social context is welcome — and overdue. His thoughtful lecture on Nov. 3 offered a defense of how and why banks take risks. He explained how they facilitate payments, transform short-term deposits into long-term loans, and smooth fluctuations in currencies and commodity prices. This may all seem obvious, but banks do a poor job of explaining their purpose. Few chief executives are willing to speak in public. Those who do have tended to rant against regulation or make veiled threats to relocate their businesses overseas.

That said, many of Barclays’s past actions are hard to reconcile with Mr. Diamond’s newly stated tests of serving social purpose and meeting real client need. Consider the mortgage borrowers who were persuaded to take out superfluous payment protection insurance. Or the Barclays unit that specialized in structuring aggressive tax arbitrage schemes. And while a court in March dismissed a claim that Barclays had mis-sold derivatives to a small San Marino bank, the case raised questions about whether the lender put its client’s interests first. Mr. Diamond’s credibility will depend on how he goes about stamping out such behavior.

Regaining public trust requires two other big changes. First, taxpayer bailouts must end. Mr. Diamond agrees that no public money should be put at risk when a lender fails. But regulators are still a long way from being able to safely wind down a large, complex bank like Barclays.

The second issue is pay. This is touchy for Mr. Diamond, whose outsize bonuses have long been a source of public envy and anger. He insists that banks must be competitive when recruiting staff members. Meanwhile, his industry’s rapidly dwindling profitability means compensation is bound to be squeezed. But bonuses remain a major barrier to reconnecting banks with the public. Unless Mr. Diamond tackles this issue, any other improvements could easily be overlooked.

For more independent financial commentary and analysis, visit www.breakingviews.com.


Jan 10

Global Witness Quits Group on ‘Blood Diamonds’

The organization, Global Witness, is the first advocacy group to leave the program, known as the Kimberley Process, which was set up in 2003 because conflicts in Angola and Sierra Leone were being fueled by diamond sales. Global Witness had expressed concerns about how the Kimberley Process was operating for some time; it said the final straw was the decision last month to allow Zimbabwe to export diamonds from the Marange fields, where there have been reports of widespread human rights abuses by government security forces.

“It’s the most egregious situation that we’ve seen since the Kimberley Process was launched, where diamonds have been fueling violence and human rights violations,” said Annie Dunnebacke, the senior campaigner for Global Witness, “and the Kimberley has really failed to deal with that effectively.”

More than 70 countries, including the United States, have signed the Kimberley Process agreement to adhere to United Nations-backed safeguards on trade in rough diamonds.

Under the agreement, all rough diamonds that cross the member nations’ borders must have certificates of legitimate origin and must be bound to or from another member nation.

While the ultimate decision-making of the Kimberley Process is in the hands of the countries, diamond industry groups and advocacy groups serve as observers; they take part in compliance missions to mining sites, participate in official meetings and contribute to reports and decisions.

The advocacy groups have complained for years that member countries lacked the political will to prevent one another from breaking the rules, and that the diamond industry was using the process as an excuse for turning a blind eye.

Many traders and dealers are “hiding behind the Kimberley Process,” Ms. Dunnebacke said, and do not check on the actual sources of the diamonds they handle.

“The industry taking responsibility and acting on cleaning up the diamond supply chain is really essential here,” she added. “They’ve just been saying, ‘We have the Kimberley Process for diamonds, so that’s that — we’ve solved the problem of blood diamonds.’ ”

Some within the Kimberley Process say it needs an overhaul. Currently, diamonds are only classified as “conflict diamonds” when the violence surrounding them is fueled by rebel groups, not when governments are responsible, as many human rights activists argue is the case in Zimbabwe.

Farai Maguwu, the director of the Center for Research and Development, based in Zimbabwe, which is also a member of the Kimberley Process, said that while he believed Global Witness’s withdrawal would not bring down the whole system, it was “a very big blow.”

“The Kimberley Process will never be the same,” Mr. Maguwu said. “A very influential member of the Kimberley Process has cast a vote of no confidence.”

He said he did not foresee a wider exodus, though his group and others share many of Global Witness’s concerns.

“We are simply trying to redefine our relationship with the Kimberley Process and see what is possible to be delivered by the Kimberley Process and what is not possible,” Mr. Maguwu said. “We feel that our presence within the Kimberley Process is still making some impact, though we are not getting everything that we want.”

The rotating chairmanship of the Kimberley Process is held by Congo. A man who answered one phone number for Congo’s representatives to the process said he could not comment; calls to the delegation’s other numbers were not answered on Monday. The chairmanship will pass to the United States on Jan. 1.

Michael Mann, a spokesman for Catherine Ashton, the European Union’s high representative for foreign affairs and security policy, wrote in an e-mail on Monday that the Kimberley Process “may not be a perfect instrument, but it is the best we have, and therefore all parties, including civil society, should work to make it effective.”

Mr. Mann added, “Abandoning it doesn’t help achieve that common goal.”


Jan 10

Modern Jewelers Bring New Twist to Bridal Designs of Old

The tradition of sealing a betrothal with a diamond ring reached its apogee in the past decade, with celebrities flaunting rocks the size of sugar cubes on their fingers. Despite the transience of some of those unions, the tradition persists — albeit with an undercurrent of 21st-century nonconformity.

Take Maureen Meyer, for example. Shortly after her 2009 nuptials, two things led the 32-year-old co-owner of Rosebrook Meyer, a wedding invitation business, to reconsider the traditional jewels she had worn on her wedding day: Her wedding band went missing and she became pregnant.

“That changed our perception of being newlyweds and opened us up to do whatever we wanted,” she said.

While shopping for a replacement band, Ms. Meyer came across a vintage 1930s emerald-cut tourmaline ring. Set in platinum, the dark green gemstone instantly seduced her.

“I thought briefly, is this too unusual?” Ms. Meyer recalled. “And then I thought, it doesn’t matter.”

Ms. Meyer now alternates between the tourmaline ring and the emerald-cut diamond ring her husband gave her when he proposed in 2008, pairing them with “a paper-thin gold band.” She is not the first woman to break with precedent in her choice of bridal jewelry, but her experience underscores a sea change in the industry.

Long the province of staid, conventional rings that have not changed much since 1886, when Tiffany Co. introduced its iconic six-prong setting, bridal jewelry has benefited in recent years from an infusion of novelty introduced by refugees from the fashion side of the business, drawn to a recession-resistant niche.

At roughly $12 billion, bridal jewelry sales in the United States accounted for about 20 percent of the overall jewelry market in 2010, said Ken Gassman, president of the Jewelry Industry Research Institute.

“Not only is it a relatively recession-proof category, it’s ripe for jewelry designers,” Mr. Gassman said. “That single-stone solitaire that every mother in America had is not what today’s bride wants.”

Unless, maybe, the solitaire bears the unorthodox stamp of Anna Sheffield, a metalsmith in New York best known for her costume jewelry collection, Bing Bang. Ms. Sheffield started exploring fine jewelry in 2007, seeking inspiration in her grandmother’s heirloom ring. “I wanted to see how I could make it punk rock and crazy,” she said.

She reimagined the center stone as a faceted hunk of gold with a tiny diamond tucked inside the shank. The piece eventually spawned a bridal and commitment jewelry line, introduced in September, that is at once charming and impertinent: black diamonds, solitaires with inverted settings, and outré inscriptions.

Available at Liberty in London, Ms. Sheffield’s collection is one of seven lines that will be part of a new “alternative engagement ring bar” opening in March, said Kate Brindley, head of media relations for Liberty. Displaying cutting-edge work from the likes of Ruth Tomlinson, Jordan Askill and Moritz Glik, the showcases are reserved for fine jewelers who are “using traditional stones in a slightly more irreverent way,” Ms. Brindley said.

“I know engagement rings are supposed to be classic and traditional, but why can’t something left of center last forever?” Ms. Brindley asked.

Stephen Webster, the British designer, has answered that question with his first bridal collection, presented in October at a goth dinner party in London. The line features the thorn motifs and romantic-macabre inscriptions (“’Til death do us part”) that are his signature.

Even the iconoclastic Mr. Webster, however, understands that the primary purpose of bridal jewelry is to symbolize a loving, just and enduring commitment. He has conceded to that tradition by incorporating gold from Peru certified by Fairtrade and conflict-free diamonds from De Beers’s Forevermark brand into his settings.


Jan 10

Auction Shows Elizabeth Taylor’s Star Still Shines

Those little laminated tags were a delightful testament to the sense of humor and unusual unselfconsciousness possessed by one of the world’s most relentlessly scrutinized women.

“I can’t remember a day when I wasn’t famous,” Taylor once said, but perhaps because she was virtually born into it, she wore her celebrity as casually as she did her stupendous baubles. That 33-carat diamond ring, once called the Krupp and later named after its new owner (and which sold for an eye-popping $8.8 million), was an everyday piece for a woman whose everyday life had been tabloid fodder since childhood.

The cheeky luggage tags also attested to her exuberant acquisitiveness, although the contents of the Vuitton trunks — and indeed the trunks themselves — are hers no more, of course. Taylor died in March at age 79, defying a general impression of immortality gained through the numerous marriages, the multiple scrapes with death, the half-century-plus of movie fame and the later years of eccentricity.

Her closets, meanwhile, went on an extravagant tour worthy of the onetime widow of Mike Todd, producer of “Around the World in 80 Days.” Beginning in September, Christie’s sent the Taylor goods on a globe-trotting series of exhibitions: in Moscow, London, Paris, Dubai, Geneva, Hong Kong, Los Angeles and finally New York.

The New York exhibition alone was seen by more than 25,000 visitors, who came to ogle the jewels and the ancillary items, including Taylor’s three Oscars (on view, though not for sale) and costumes from some of her more fabled flops, like “X, Y and Zee” (crazy Edna O’Brien-based psychodrama), “A Little Night Music” (worst movie musical ever) and “Boom!” (Possibly the worst movie ever — but fabulous!)

The auction company profited mightily from the publicity this global gawk-fest inspired. The first night of the auction racked up $115.9 million, more than doubling the record set for a private jewelry collection, previously held by no less a celebrated 20th-century clotheshorse and bauble aficionado than the Duchess of Windsor, whose effects netted about $50 million in 1987.

By the time two more rounds of jewelry had been sold, a record for any jewelry auction had been set: $132 million.

The exuberant tone was set when the bidding for the first item of the Tuesday evening sale, a comparatively bling-free gold charm bracelet spritzed with a few minor gems, rocketed well north of the estimate, $25,000 to $35,000. When the gavel hit the wood, the bracelet had sold for $326,500.

The estimates, which proved to be laughably, almost perversely low, were apparently derived only from the intrinsic value of the metals and minerals involved. The crucial but impossible-to-quantify factor of stardust was not included in the equation.

Proving that the extravagantly rich are not immune to the charms of secondhand celebrity, the bidding maintained a giddy pace through the night. To cite just one memorable example, the famous La Peregrina pearl, dangling from a necklace of pearls, diamonds and rubies by Cartier, caused ripples of murmurs and applause when it sold for $11.8 million, almost four times the estimate of $3 million.

Previously in the possession of Spanish kings and queens before being swiped by Napoleon’s brother Joseph during his brief reign over the country, it lost a little weight in its complicated trajectory through the subsequent centuries (the pearl “might have been ‘skinned’ and polished to bring back its superb natural luster,” the catalog informs) before it was given to Taylor by Richard Burton for her 37th birthday.

The mood remained tingly with excitement whenever a major gem came up for sale, despite an absence of boldface names seated in the auction room itself. I didn’t recognize a single socialite, or even a “Real Housewife.” Elderly ladies in track suits and New Balance trainers sat alongside sleek-suited hedge-fund types and their gum-chewing, processed-looking wives. A woman in a spangly backless dress paraded up and down in the front row, although I didn’t see her flapping a paddle.

Actually, most of the best-dressed people in the room were the cadres of Christie’s employees, in eveningwear in honor of the occasion, a relative rarity in auction rooms today. Scurrying about to pound out news releases as record after record was set, or standing around the periphery of the room pointing out the paddle-wavers to the evening’s two auctioneers, they constituted a small, extremely well-appointed army in service to the super-rich.

Charles Isherwood is a theater critic for The New York Times.