Luk Fook Holdings reported that the slump in sales continued in its first fiscal quarter due to a slowdown in Mainland China and low sales in Hong Kong and Macau. The firm last month reported that sales and profit tumbled for the fiscal year ended March 31.
New De Beers Group CEO, Bruce Cleaver, has highlighted the importance of relationships with all the company’s partners, saying they are the “cornerstone of the business”, the company stated in a press release citing his blog for the company website. Mr Cleaver, who took up the role on 1 July, said: “De Beers holds a unique position with consumers, our rough diamond customers, governments, communities and retailers ...
Drawing a worrying analogy between the film The Big Short (2015) - which depicts how everyone took part in the ultimately disastrous play on U.S. subprime mortgages even though the fundamental truth was, or should have been, known to those familiar with the mortgage market - and the current trend in the diamond market, Ehud Arye Laniado issues a warning about ignoring the lessons learned as a result of the diamond downturn of 2015.
Luk Fook warns that its profit for the past fiscal year which ended on March 31 is likely to drop by 35 to 45 percent as a result of reduced spending by tourists from mainland China. The strength of the Hong Kong dollar against China's renminbi is also putting Chinese visitors off buying, along with an economic slowdown in the mainland and a rise in the popularity of other tourist destinations.
Charles Wyndham is left singularly unimpressed with the Diamond Producers Association (DPA) new slogan, as part of its marketing strategy, of ‘Real is Rare. Real is a diamond.’ It falls far short of the legendary ‘A Diamond is Forever’ slogan which hit the emotional value of diamonds and also the fact they are a store of value. But it also aims for the wrong target and even succeeds in missing that, he comments. "My assumption is that the key aim of this tag line is to combat the threat of synthetic, or as I would prefer [to call them] cultured diamonds.
Jewelry retail giant Chow Tai Fook reported net income fell to $379 million for the year ended March 31, significantly below analyst estimates compiled by Bloomberg and 46 percent lower than the year-before figure. Hong Kong retail sales fell 12 percent in the first quarter, with jewelry and watch sales plummeting almost double that, contributing to Chow Tai Fook’s lowest profit since 2010.
In promising economic news, US consumer spending rose at the fastest rate in nearly seven years in April, indicating stronger economic growth after a slow start to the year. Personal spending was up 1.0% in April from a month earlier, the Commerce Department said, the largest one-month jump since August 2009. Household spending accounts for more than two-thirds of economic output in the U.S. and has been a driving force for the expansion for more than five years. But consumers had been steadily pulling back since mid-2015.
De Beers' increase in the price of rough diamonds in April for the first time in one year, albeit only by about 2%, is an encouraging sign, writes diamantaire Melvin Moss, adding that although the diamond market will still take a year or two to recover the news is positive. Indian cutters have increased output and diamonds are selling with polished prices stable. "VS and SI goods are hot but GIA reports are inconsistent making it very difficult to purchase tightly graded diamonds."
There was a 35% jump in US jewelry business discontinuances in the first quarter, Rapaport reported citing Jewelers Board of Trade (JBT) figures. Of the 380 companies that exited the business, the largest number was those that “ceased-operations”, meaning firms closing down for reasons other than financial difficulty or consolidation. This category of closures jumped 34% to 323. Meanwhile, consolidations, including sales and mergers of jewelry firms, more than doubled to 53. A bright spot in the figures was a 75% fall in the number of bankruptcies to just four.
US consumers purchased a record annual level of $39 billion of diamond jewelry in 2015, according to industry data published by De Beers. However, the global market saw a 2% decline in diamond jewelry sales last year to $79 billion from a record $81 billion in 2014. The figure for the US market was a 5% rise on 2014 with De Beers attributing it to sustained economic recovery, higher levels of job creation and wage growth. The US remains the world’s largest market for diamond jewelry sales and increased its share of global polished diamond demand to 45% last year from 42% in 2014.
Diamond industry veteran John Bristow, who has more than 30 years experience in the trade with De Beers and other miners, believes the widely held belief that demand for rough will outstrip supply in the coming years may not come about. Bristow believes the diamond market works efficiently, and that the current over-supply will be replaced by a well balanced market in 18 months, according to a report on miningmx.com.
Diamond industry analyst Edahn Golan draws back the veil of rhetoric concerning synthetic and natural diamonds to reveal what has been missing from the debate thus far: hard numbers.
Surat’s diamond sector is feeling more upbeat following the end of the national jewelers' strike and rising demand from China and the United States for polished goods. After picking up in January-February, trade again plummeted in March due to the nationwide jewelers' strike over a proposed new tax on gold that served to put a dent in domestic demand for diamonds, The Business Standard reported. Traders believe that a rise in domestic and international demand as well as the effect of the end of the strike will create a rise in business levels.
Chow Tai Fook Jewellery Group Ltd., the largest jewelry retailer in China, posted heavy falls in mainland sales in the first quarter of 2016 from a year ago. Same-store sales of jewelry plunged 24% while those of gold products slumped 29%. The company said a growing number of mainlanders are traveling overseas to shop for luxury items and other products, while the country’s slowing economy has battered consumption. The important Hong Kong and Macau markets posted a 26% decline in the value of combined sales and a 27% drop in same-store sales.
The De Beers Group has officially announced the value of rough diamond sales (Global Sightholder Sales and Auction Sales) for the third sales cycle (sight) of 2016 at a provisional $660 million, while the second sight figure was $617 million. The third sales cycle took place last week. In the first three months of this year De Beers has sold $1.8 billion of rough goods as demand has surged.
Diamond industry analyst and wholesale diamond supplier Melvin Moss believes the diamond industry is heading down the same road that led to a "glut of unwanted goods" last year, and that this will soon lead to a fully-fledged buyers' market. He writes, "Total rough supply to the market in the first quarter of 2016 is estimated at 3 billion dollars. Manufacturers have purchased large quantities of rough but their purchases are not converting into a greater demand for polished diamonds.
Diamond industry analyst Ehud Arye Laniado reflects on uncertainties and lingering questions about the direction the diamond trade is taking in the wake of BaselWorld, and wonders whether it is even appropriate to sell loose diamonds at such a high-luxury show? We have selected a few choice comments: "Business [in the diamond section] was not good. This luxury-oriented show is not a good fit for small goods or even 1-2 carat items.
Further evidence of the slowdown in Hong Kong and Macau consumer sales of jewelry has been provided with Chinese jeweler Chow Sang Sang Holdings International Ltd. reporting that revenue in the two areas dropped 7.7% on the year to $1.4 billion for 2015 due to a fall in gold prices and slower jewelry sales. The company's same store sales in the two Special Administrative Regions posted a sharp fall of 11% on the year.
There was a 2.9% increase in jewelry prices in the United States last month, according to statistics from the Bureau of Labor Statistics which showed the rise in the consumer price index (CPI) for jewelry, reported Rapaport. The figure was 6.2% higher than a year before. The increase followed a rise in polished diamond prices in February, with the RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded diamonds rising 0.3 percent. RAPI for 0.30-carat diamonds advanced 0.4 percent and RAPI for 0.50-carat diamonds added 0.7 percent.
Diamond industry analyst Ehud Arye Laniado analyzes the current state of the industry after hearing that ALROSA's third sales period of the year is currently estimated at $300 million-$350 million, about half of what De Beers supplied in February. The key question is whether the $3 billion in rough diamonds already sold by the major miners in the first quarter of 2016 genuinely indicates increased demand and that the market is getting back on its feet. Thus far he has concluded it does not.
Against the lavish backdrop of Baselworld, "the glittery industry fair, where the latest innovations in timekeeping are unveiled and gem-encrusted baubles from the likes of Chanel, Chopard, Patek Philippe and Graff tempt buyers from around the world," Kati Chitrakorn writes for Business of Fashion that all is not well in the diamond industry backstage. "Acute pressure has been mounting on the industry’s $80 billion diamond market.
International Gemological Institute (IGI) North America has begun a national advertising campaign on U.S. cable TV to raise consumer awareness about, and confidence in, the diamond and fine jewelry industry. The adverts started airing on Fox News, MSNBC, CNBC, CNN, HLN and Time Warner Cable NY1 News from March 14, according to an IGI statement Monday. They are focused on educating consumers about the need for independently graded and evaluated diamonds, which would in turn provide peace of mind and incentivize them to buy fine gemstone jewelry.
In an exclusive interview with Rough & Polished, analyst Paul Zimnisky discusses a wide range of issues, from diamond production volume and prices to oversupply and mid-stream purchasing trends, profit margins, consumer demand and synthetic diamonds. A few key takeaways:
Diamond industry analyst Ehud Laniado performs a thorough analysis of current rough diamond supply and polished demand, noting a clear trend toward the same oversupply of rough and minimal profitability that undermined the industry in 2015.
Signet Jewelers Limited, the world's biggest retailer of diamond jewelry, has seen a sharp rise in its share price today (Monday) after it reported that fiscal fourth quarter same store sales increased 4.9% on the year in the period ending January 30, 2016. That compares with analysts' forecasts of a 4.6% increase. The firm also said its earnings per share will be strongly higher.
Signet's directors have commended a new share repurchase authorization of $750 million and also approved an 18% increase in dividend.
Anglo American/De Beers has released its 2015 annual figures, and a 5% increase in the average realised diamond price was not enough to offset weaker rough diamond demand, leading to total De Beers revenue falling 34% to $4.7 billion (2014: $7.1 billion). De Beers reports that this was, "mainly driven by lower rough diamond sales, which declined by 36% to $4.1 billion. This was due to a 39% reduction in consolidated sales volumes to 19.9 million carats (2014: 32.7 million cts)." De Beers’ underlying EBIT decreased by 58% to $571 million (2014: $1,363 million).
Speaking at the opening of the four-day IIJS Signature show in Mumbai, writes GemKonnect, India’s Gem & Jewellery Export Promotion Council (GJEPC) chairman Praveenshankar Pandya said he wants the global industry to spend at least as much annually on global generic promotions as De Beers used to spend before it stopped doing them completely - $200 million.
David Brummer writes for Idex Online that the Chinese New Year - the Year of the Monkey - "comes at a bit of a crossroads as far as retail is concerned, both in mainland China and on the island city of Hong Kong." Hong Kong retail sales suffered their worst annual decline last year since 2002, battered by a fall in big spending tourists from the mainland and weak consumer spending.
Diamond industry analyst Avi Krawitz addresses the bouyant rough diamond sales by De Beers and ALROSA in January, but notes that this has led many to wonder whether it is sustainable. To wit, does the seemingly improved sentiment truly reflect rising consumer demand, or is it another case of overreach on the part of manufacturers? For while "sightholders were quick to point out that the market mood is currently “much more positive,” it is important that stakeholders are aware of the factors that have underpinned the sudden turnaround in rough diamond demand."
Diamond industry analyst Edahn Golan breaks down how De Beers arrived at its overall sales figure for its first rough sight in 2016: $540 million. Golan writes that De Beers has several sales channels. The largest is to their sightholders - contracted clients who each buy at least $15 million worth of rough diamonds annually - and the accredited buyers, which have second dibs on the offered goods. The current estimate in the market is that De Beers sold a little over $490 million worth of rough diamonds via the sightholder system.
At Anglo American's December 8 Investor Day Presentation, De Beers CEO Philippe Mellier stated that, "I am very pleased to announce that we would like to increase the transparency of De Beers, and starting with the first sight in 2016 we will communicate after each sight the sales of each sight, so that you don’t rely on rumours and you will understand exactly where we are." The Financial Times sought feedback from industry insiders on De Beers' d
"Diamond sector profitability came under the spotlight in 2015 due to sluggish consumer demand in emerging markets and high rough prices relative to the resulting polished", writes Avi Krawitz for Rapaport Magazine. "Consequently, the year was one the industry would rather forget as it was characterized by excess supply and consolidation. Polished prices fell as manufacturers held large quantities of diamonds that were difficult to sell.
Chinese store sales of gold, silver and jewelry rose 7.3% on the year in 2015 to $42 billion, the country's National Bureau of Statistics (NBS) reported. There was an 11.1% jump in sales in December to $4.6 billion, the NBS said. The figures are somewhat surprising due to the slowing Chinese economy and diamond industry accounts of reduced buying in the world's second-largest diamond consuming market.
The United States and European nations lifted oil and financial sanctions on Iran and released roughly $100 billion of its assets after international inspectors concluded that the country had followed through on promises to dismantle large sections of its nuclear program. Nuclear sanctions have been in place since 2006, while other sanctions stretch back decades. The announcement came after days and weeks of secret high-level diplomacy - particularly by American Secretary of State John Kerry - and the release of long-held prisoners on both sides.
With the Chinese New Year season approaching, the outlook for sales is not very hopeful, writes Avi Krawitz, citing volatility on the Shanghai stock exchange, the government's devaluation of the yuan, economic growth slowing, major retailers such as Chow Tai Fook and Luk Fook publishing sharply lower Q3 sales and profits in recent weeks and falling manufacturing output showing that global demand for Chinese products is declining. Chinese jewelers overbought in 2014 and are still holding enough inventory for the Chinese New Year which begins on February 8.
Mobile sales in the United States jumped 59% on the year to $12.65 billion in the November-December holiday sales season, accounting for 18% of overall digital commerce compared with 13% a year before, said retail industry monitoring firm comScore. The rise was in line with the research firm's forecast that mobile commerce revenues would increase by 50-60-percent. Overall digital spending is forecast to have increased by 13% to $69.1 billion, with desktop computer sales up 6 percent to $56.4 billion, the firm said in a statement.
Around Turkish 2,000 jewelry stores closed down last year as a result of falling jewelry spending due to limitations on the number of credit card payments allowed by the authorities and consumers' desire to spend on electronics and vacations, according to sector representatives cited by the Hurriyet national newspaper. “Our sector has seen a serious contraction," said Emil Güzeliş, the owner of Turkey’s leading jewelry exporter, Zen Pırlanta. "Some 2,000 of 26,000 jewelry stores were closed down last year.
Rapaport's "Weekly Market Comment", sums up the current mood of the diamond market as follows: "Polished prices [are] firm, market mood [is] much better and rough demand [is] improving due to polished shortages. Manufacturing [is] still at about 30% below capacity. We advise caution as current market prices are based on shortages created by artificial rough prices that are higher than resultant polished. Rough market volatility expected in 1H as miners reduce prices to increase revenue." Meanwhile, with the Chinese New Year right around the corner (Feb.
Vocalizing what many in the industry have been whispering in the corridors, jeweler and diamond industry blogger Mel Moss says that the current adversity facing the diamond industry - i.e., the miners and manufacturers - could serve as a catalyst for positive changes, provided a change of attitude. "These sectors need to realise that the diamond industry is a separate entity from the jewelry industry. The predominant attitude among diamantaires is that diamonds are the focus of all jewelry. The truth is that the diamond industry is dependent on the jewelry industry...not vise versa!