SECOND-HALF FORECAST:

More Promotions and platinum

Sales & Profits
Expectations for results of the second half of 1997 compared with 1996.

	Sales	Profits
Increase	67%	59%
Decrease	22%	15%
No change	11%	26%
Source: JCK Retail Jewelers Pane

Buying Plans
The figures represent the percentage of respondents who plan to change their product mix for the second half of 1997 compared with the same period of 1996.

	Buy more	Buy less
Platinum jewelry	54%	9%
Loose diamonds	52%	13%
Karat gold jewelry	51%	10%
Diamond jewelry	46%	13%
“Bread & butter” jewelry	35%	16%
Sterling silver jewelry	30%	21%
Cultured pearls	28%	27%
Designer jewelry	23%	23%
Watches	23%	26%
Colored stone jewelry	19%	32%
Loose colored stones	8%	42%
Writing instruments	7%	35%
Other*	22%	16%
*Includes giftware. estate jewelry, custom-made pieces

It should be a sparkling second half for U.S. jewelers, according to a nationwide poll of the JCK Retail Jewelers Panel.

Two-thirds of jewelers polled expect higher sales in this second half than they did in 1996. Three out of five expect higher profits. Much of this optimism is due to better-than-expected first-half sales. In the first half, business increases centered on diamonds – loose, larger and in jewelry. “Diamonds are the winner” in the first half, says Dick Thomas of Thomas Jewelers, Logan, Utah.

However, no one should peg their hopes on one product, says an Illinois jeweler. “No one product does it all. It’s the product mix that keeps it alive.”

Platinum Wins

For the first time in many years, platinum nudged out gold and loose diamonds as the top product category jewelers say they’ll increase.

More than half the jewelers polled (54%) said they would buy more platinum jewelry in the second half, compared with 52% who will buy more loose diamonds and 51% for karat gold jewelry. This increased demand for platinum – especially engagement and wedding rings – is found nationwide. Jeweler Hal Davis in Boise, Idaho, and Capri Jewelers, Glenn Allen, Va., for example, plan to increase their promotions of platinum jewelry. “Platinum continues to increase, along with designer goods, so we’re marketing more platinum jewelry through TV,” says a Capri spokesman. In St. Louis, Mo., Michael Genovese, Genovese Jewelers, is “increasing our production and purchase of platinum to 35% of total inventory.”

Nearly half the jewelers polled tell JCK they also will buy more diamond jewelry, loose diamonds and karat gold jewelry this fall than originally planned, based on first-half sales, especially for larger diamonds, earrings and solitaire diamond anniversary necklaces.

But not everything is sparkling in jewelry stores. At least one in three JCK panelists say they will buy fewer loose colored stones, colored stone jewelry and writing instruments than they had planned, based on first-half results.

Marketing grows

More aggressive marketing should help to boost sales. One in seven respondents say they plan to boost their promotions and advertising this fall beyond what was budgeted due to high first-half sales.

“We will use much more direct response marketing to sell diamonds in the second half and target our existing customer base too,” says Dick Thomas of Thomas Jewelers. Other jewelers, including Sharps Jewelers, Griffin, Ga., will put more effort into loose diamonds.

Pearls were very strong during the first half in Milwaukee, Wis., reports Schwanke & Kasten Co., which is promoting them with more TV ads. In Wayne, Pa., Wayne Jewelers is boosting its exposure of gold jewelry. In Milford, Ohio, Norris

Jewelers is focusing more of its advertising on “creating jewelry for those who appreciate something out of the ordinary,” says a store spokesman. Gudmondson & Buyck in Columbia, S.C., is using more newspaper ads and postcards to promote its watches.

These marketing efforts apparently could reach a receptive public. Well over half the panelists (57%) polled say consumer confidence in their local market is “strong” or “very strong,” an attitude reflected in the heavy restocking of several major product categories for this fall.

Dorman resigns from AGS

Thomas P. Dorman resigned his position as executive director of the American Gem Society at the end of August. He had been executive director since 1990.

AGS says Dorman will remain as a consultant to the society for six months; Ruth Bennet, AGS controller, has moved into the position of executive director on an interim basis. AGS says she will remain in that position until a new candidate has been selected. Herb Bridge, chairman of the AGS trustees, is heading the executive search committee. Bridge says Dorman had a “rugged time at AGS recently, getting the laboratory running and with assorted personnel challenges.” Nevertheless, AGS is seeking a candidate with many of the same characteristics that Dorman has, says Bridge, including “leadership qualities, excellent rapport with people and an ability to plan and execute AGS goals.”

Also at AGS, Yancy Weinrich was promoted to membership manager. Weinrich has been with AGS since February 1996, when she was hired as Dorman’s executive assistant.

All inquiries regarding the executive director’s position should be directed to Herb Bridge at (206) 448-8800, ext. 868, fax (206) 448-1993.

Finlay to Buy Assets of Zale Corp’s Diamond Park

Zale Corp. plans to close its Diamond Park leased department division and focus its resources on more profitable mall stores in its three remaining divisions.

Finlay Enterprises, the largest operator of leased fine jewelry departments in the U.S. and France, is expected to pay $66 million for the assets of Diamond Park. The sale, expected to occur about Oct. 6, will give Finlay 139 more leased jewelry departments (in Marshall Field, Parisian and Mercantile department stores) for a total of 1,097.

Under the agreement of sale, Finlay will acquire Diamond Park’s fixed assets, working inventories and leases and will offer employment to everyone in the 139 departments. In return, Diamond Park will not engage in the leased jewelry department business for seven years and will continue to operate Dillard’s leased departments only until the current contract expires Jan. 31, 1998.

The Diamond Park departments reported combined sales of about $100 million for the fiscal year ended July 31. That represented about 8% of Zale Corp.’s annual sales and 2% of its profits.

Zale and Finlay officials praise the deal as being in the best interests of their companies.

“This small segment of our business does not offer potential for future growth,” says Robert J. DiNicola, chairman and chief executive officer of Zale Corp. “This will enable Zale to redirect important resources from a marginally profitable, non-core asset to its more profitable mall jewelry store operations.”

For Finlay, the acquisition reinforces its position as the leading operator of fine leased jewelry departments in the U.S., says Arthur E. Reiner, president and chief executive officer. He expects the acquisition to improve Finlay’s bottom line through the leveraging of expenses and other operating results.

Finlay officials say the acquisition will be financed through an increase in the company’s revolving credit arrangement from $135 million to $225 million. (The additional borrowing capacity also will alter seasonal borrowing needs.)

Finlay also announced plans to file a registration statement with the Securities and Exchange Commission for a public offering of 3 million shares of common stock. Finlay will offer about 2 million and a shareholder will offer the rest.

Proceeds from the stock offering will be used as working capital, to repay debt and for other general corporate purposes. The timing of the offering and its price are subject to market conditions and other factors, says Finlay.

Hucker New Agta Executive Director

Douglas K. Hucker has been hired as the American Gem Trade Association’s new executive director, says Nanette Forester, president of AGTA, Dallas, Tex.

Hucker has extensive experience in the colored gemstone industry. He has worked as a gem dealer, Gemological Institute of America instructor, retailer (most recently at The Registry Ltd. in St. Paul, Minn.) and has had experience in the manufacturing end of the business during a tenure with Krementz & Co., Newark, N.J.

“Obviously the main objective for AGTA is to promote the sale of colored gemstones, and I believe several things need to be done to reach those objectives,” Hucker says. “We need to aggressively address the problem of lack of knowledge about gemstones in the stores. Education is key, and my efforts at AGTA will be to make further strides in that direction.

“We need to really address the problem of gemstone enhancements and treatments. Although these problems are not new to the industry, I believe the industry has not formed a sufficiently unified plan to deal with them. There is a lot this industry can do in how we work together. Ties with other organizations that have a similar vision and a cooperative spirit will be very important.”

Colibri Agrees To Acquire Krementz, Again

For the second time since June, the Colibri Group, Providence, R.I., agreed to acquire certain assets of Krementz Jewelry and Shiman Religious Jewelry from Krementz & Co., Newark, N.J. The merger, initially announced in June but quickly scuttled, was finalized Aug. 28, according to Frank Dallahan, Krementz executive vice president of sales. No purchase price was disclosed.

Krementz, which made its intentions to sell the divisions known several months ago, will remain as a jewelry line operated by Colibri.

“Colibri realizes that Krementz has a strong, loyal group of retail clients and it will work within that group to maintain the Krementz name,” says Dallahan. About 4,000 retailers are active Krementz clients, he says.

The two Krementz divisions affected by the sale produce the company’s 14k gold overlay, 18k gold electroplate and 14k gold religious jewelry. While final decisions regarding staff and locations have not been made, Dallahan says manufacturing will likely be centered at Colibri’s Providence location, though the Shiman manufacturing may remain in Newark. A final decision will be made soon.

Krementz employs about 250 in Newark. No decisions had been made at press time regarding who may head the company’s Krementz Jewelry and Shiman lines.

Krementz Chairman Richard Krementz Jr., whose grandfather started the company 130 years ago, will continue operating Krementz Gemstones, an affiliated Newark-based firm, that produces colored gemstone jewelry by designer Judy Evans.

Colibri is a large jewelry manufacturer making products with brand names that include Colibri, Van Dell, Dolan & Bullock and Linden Clocks.

Diamond Earnings At De Beers Rise 14% In First Half

De Beers’ diamond earnings from its Consolidated and Centenary divisions rose 14% to $510 million in the first six months of 1997.

Overall, profits rose 5% to $507 million; $75 million of the total came from the sale of De Beers’ stake in the JCI mining house to the National Empowerment Consortium, South Africa’s first black investment group to operate a major mining operation.

Here are some other financial highlights from the first half:

Expenses for prospecting and research increased $13 million to $67 million.
Diamond stocks decreased more than $560 million to $4.142 billion, primarily because Argyle Diamonds of Australia broke from the De Beers network last year and because of a suspension in formal dealings with Russia. (De Beers bought $150 million worth of rough from Russia in the first half, but received only half that amount because of export restrictions.)
Taxes rose 49% because of a change in tax status of the company’s older South African mines.

Meanwhile, sales by De Beers’ Central Selling Organisation hit a record $2.88 billion in the first half. Directors think worldwide diamond sales will remain even with 1996 levels this year, with continued strength in the U.S. being offset by weaknesses in Japan and Southeast Asia.

Sterling And Signet Post Half-Year Gains

The Signet Group reported strong gains for the six months ended Aug. 2. Signet is the world’s largest jewelry retailer and parent of Sterling Inc., the second largest U.S. jewelry retailer

Operating profits for the London-based retail group, which operates 1,368 jewelry stores, rose 27% to $20.8 million. Pretax profits totaled $3.1 million, a turnaround on the $9.8 million loss for the same period of 1996.

Signet’s comparable-store sales were up, while its debt in the half year was reduced by $150.8 million to $351 million from the first six months of last year. This reflects improved operating performance, says the company report, as well as a lower proportion of credit sales in the U.S.

In addition, a capital restructuring approved by shareholders in July was approved by British courts on Sept. 3 and was expected to be effective before the end of September. This was affected by a shareholder-approved refinancing of the Signet Group’s capital structure and the voluntary refinancing of its borrowings.

Sterling, headquartered in Akron, Ohio, accounted for 63% of Signet’s turnover. Its operating profit for the period rose 16.4% to $26.2 million. Sales tallied $395 million, a 5% gain over the same period of 1996.

There was a small decrease in gross margins, says the report, but tight controls were maintained and debt charges dropped from 3.6% to 3.1% of total U.S. sales.

Sterling’s strong sales performance resulted from more effective marketing and promotional programs and improvements made to merchandise ranges and assortment, according to he company.

Sterling had 773 stores as of Aug. 2, most in shopping malls and operating nationally under the names of Kay Jewelers and regionally under the names Belden Jewelers, J.B. Robinson, Weisfield, Osterman, LeRoy’s, Shaw’s, Rogers, Goodman, Friedlander’s and Hudson Goodman.

OROMERICA, Ravel sign agreement

OroAmerica Inc., the largest manufacturer and distributor of karat gold jewelry products in the U.S., bought the in-house inventory and all consignment customer accounts of Ravel Inc., a Clearwater, Fla., manufacturer of karat gold jewelry. The announcement was made Aug. 27.

Ravel’s jewelry business, debt or liabilities aren’t part of the purchase.

OroAmerica is extremely enthusiastic about the transaction, says Guy Benhamou, chairman and chief executive officer. “In addition to fortifying our position as a leading manufacturer in the karat gold jewelry industry, this purchase allows us to offer a greater variety of karat gold jewelry to a greater number of customers.” It also coincides with OroAmerica’s continuing efforts to improve its profitability, he says.

Zales Jewelers Names President

Pamela Romano, formerly a Macy’s jewelry executive, has been named president of Zales Jewelers, the largest division of Zale Corp., the nation’s largest retail jeweler. Romano will assume her new post Oct. 2, replacing Beryl Raff. Raff was promoted to executive vice president and chief operating officer of Zale Corp. in July.

Raff, also a former Macy’s jewelry executive, called Romano “a terrific merchant” and cited her extensive experience in fine jewelry retailing. “I know first-hand that she truly understands how to drive a retail jewelry business,” says Raff.

Romano will oversee the day-to-day operations of the 640-store chain and also will serve as a member of the company’s executive committee.

Robert J. DiNicola, Zale chairman, says Romano is a “top-notch merchant,” well-respected for her insight and energy. “Her selection solidifies our top line management,” he says.

For the past 15 years, Romano worked in the Macy’s organization in fine jewelry merchandising positions. Most recently, she was vice president and divisional merchandising manager with responsibility for fashion, bridge and fine jewelry for Macy’s East. Earlier in her career, Romano was a store manager with Zale Corp.’s Bailey, Banks & Biddle division.

L. Luria & Son Files Chapter 11

L Luria & Son, the Fort Lauderdale, Fla., jewelry and giftware retailer, has filed for bankruptcy reorganization and protection from creditors under Chapter 11 of the federal bankruptcy code. The papers were filed Aug. 13 in federal bankruptcy court in Miami.

Luria, founded in 1898, was sold in August 1996 to Ocean Reef Management, also based in Fort Lauderdale (JCK, September 1996, p. 26). However, the management team that took over was not able to reverse the losses and declining sales trends that Luria experienced before the takeover, says Rachmil Lekach, Luria’s chief executive officer and founder of Ocean Reef Management.

Despite recovery efforts, the retailer has “continued to experience difficulty meeting its debts when they come due,” he says. This, along with the continuing sales decline, reduced borrowing capacity and deterioration of vendor support combined to lead to the Chapter 11 filing.

The filing, says Lekach, should enable Luria to relieve itself of burdensome obligations under unfavorable store leases, realize significant value in other below-market long-term leases and maximize the ultimate return to its creditors.

The company posted losses of $53 million on sales of $121 million for the year ended Feb. 21, and $19 million on sales of $173 million a year earlier. About 40% of its annual business was in jewelry. The company has steadily reduced its number of stores; early this year it operated 28 stores, down from 43 a year ago.

JA Outlines Its 1998 Legislative Agenda

Jewelers of America has identified several federal issues it will monitor in 1998 because of their potential impact on jewelers.

These issues include postal insurance limits, tax reform, the deduction of some advertising expenses, leasehold improvement depreciations, a bill payment act, military post exchange system and music licensing. Here’s a closer look at a few of these issues:

Postal limits

In July, the U.S. Postal Service submitted several rate increase proposals to the Postal Rate Commission for consideration.

“This presents an opportunity for JA to submit more information on the need for additional insurance coverage and to advocate other changes that would facilitate the shipping of jewelry items,” says JA’s report. JA has already been successful – after a two-year campaign – in getting the Postal Rate Commission to raise the coverage limits for insured and express mail from $600 to $5,000.

JA also is pushing for further increases in insurance limits and an overnight registered mail service.

Tax reform

Some members of Congress favor a restructuring of the U.S. tax code and the addition of a consumption-based tax, flat tax or national sale tax. JA is working with legislators to educate them on the negative impact a national sales tax would have on retail sales.

Leasehold improvements

Jewelers leasing retail space in malls are sometimes required by their rental agreement to remodel or renovate their stores on a regular basis. JA is monitoring any commercial property proposals to be sure they allow jewelers to depreciate such leasehold improvement costs as quickly as possible.

Military post exchange system

Though Congress earlier agreed to keep restrictions on the type of jewelry sold in PXs, it relaxed certain restrictions on sale of furniture and consumer electronics. It also has asked the Department of Defense to report in 1998 on the impact this is having on private retailers. It’s possible the proposal to remove jewelry sale restrictions could resurface after release of the DOD report, says JA.

Correction

In “In Good Faith,” JCK, August 1997, p. 78, the retail price of a 14k gold cross with chrome diopside, pearls and rubies was listed incorrectly. The correct retail price is $890. The cross is from the Tuscan Leaves collection by Mazza/Bartholomew, 677 Fifth Ave., New York, NY 10022; (800) 255-2409 or (212) 935-4530.