Wednesday, April 30, 2008

Trio partner together; Venus, AGS and AGS Lab

The partnership leverages industry requirements with technology and marketing

Venus Jewel, the American Gem Society™ and the American Gem Society Laboratories® announced a partnership, to create an informative manner of searching for stones and their qualities. AGS Lab has allowed its AGS Performance Grading Software® (PGS) parameters to be incorporated onto the website of Venus Jewels, through which AGS members can precisely find desired diamonds in just a few seconds at Venus Jewel’s online database of products.

This service is exclusively for the AGS members. They can search stock available on the website, on the basis of Light Performance, Proportion Values, and the estimated AGS Cut Grade. The PGS results are displayed along with the ‘.srn’ and ‘.stl’ files downloadable for analysis on customers’ PGS software, ASET images of Round Brilliants are also available, with other shapes scheduled to follow shortly.

Ruth Batson, Executive Director and CEO of the American Gem Society commented, “We are extremely pleased that Venus Jewel, a company with whom we share a passion and respect for cutting-edge research and sound ethical values, has chosen to embrace the AGS Cut Grading methodology to ensure that our members make the best possible diamond purchasing decisions.” Venus Jewels is a leader in solitaires and a DTC sightholder, worth grossing over US$ 335 million.

Anil Shah, Partner, Venus Jewel said, “We are pleased to integrate PGS with our website.We foresee this partnership leading to enhanced transparency not only about our extensive grading, but also the Performance Factors introduced by the American Gem Society.”

Gold weakens on U.S. dollar rise

LONDON — Gold ended sharply lower after hitting a three-month bottom Tuesday on the back of a firmer U.S. dollar, declining oil prices and weak sentiment ahead of an interest rate decision by the U.S. Federal Reserve Board.

Gold often takes its cue from movements in the dollar because of its role as an alternative investment to currencies, stocks and bonds. The outcome of the Fed meeting would set the tone for currencies and precious metals, dealers said.

“Strength in the U.S. dollar is clearly a major factor, plus we have seen a quite bit of money coming out of the StreetTracks exchange-traded fund. Both these things are weighing on the market,” said Dan Smith, analyst at Standard Chartered Bank.

“There is some indication of consumers starting to come back in at these lower prices, but we are waiting to see how powerful that would be. I am looking for prices to recover somewhat from where we are now,” he said.

Gold held in StreetTracks Gold Shares, the world's largest gold-backed ETF, fell more than 50 tonnes in less than a week to about 591 tonnes as of Monday.

Spot gold fell as low as $868.80 (U.S.) an ounce, the lowest price level since Jan 22.

It was at $873.55/874.75 at 2:15 p.m. EDT, against $891.65/892.65 late in New York on Monday, when it hit an intraday day high of $895.50 on speculative buying driven by record high oil.

Jonathan Jossen, an independent floor trader in New York, said that gold's fundamentals remain firm in spite of a recent selloff due to the U.S. dollar's strength.

“The only thing that I can see why gold should slip is that we get deeper into a recession, and maybe that will bring commodity prices down and bring inflation down,” Mr. Jossen said.

The dollar hit its highest level against the euro in nearly four weeks, on track for its largest monthly gain in nearly a year, amid expectations the Federal Reserve will signal the end of its easing campaign.

The Fed will begin its two-day meeting later on Tuesday and analysts expect the policy-setting body to cut key borrowing costs by a quarter percentage point to 2 per cent and indicate that its rate-cutting campaign is finished for now.

A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Oil fell more than $3 a barrel, retreating further from a record high hit on Monday. U.S. crude futures ended down $3.12 at $115.36 a barrel.

George Gero, vice-president with RBC Capital Markets Global Futures in New York, said that the Fed meeting will be closely watched.

Mr. Gero also cited a lower open interest in the U.S. gold futures market, larger gold delivery notices and chart-based selling below $880 an ounce for bullion's drop.

Spot gold has been trading well below its lifetime high of $1,030.80 an ounce hit on March 17, with attempts to revisit the level resulted in heavy profit-taking by investors.

U.S. gold futures for June delivery on the Comex division of the New York Mercantile Exchange settled down $18.70, or 2.1 per cent, at $876.80 an ounce Tuesday.

In industry news, Penoles, Mexico's largest producer of refined silver, declined sharply on Tuesday, falling 6 per cent one day after the company posted a slight drop in first-quarter net profit.

Silver fell to $16.48/16.57 from $16.96/17.02 an ounce late in New York on Monday.
Other precious metals also fell, with spot platinum dropped sharply to $1,909.50/1,929.50 an ounce from $1,964.50/1,974.50, while palladium dropped to $419/427 an ounce from $432.50/438.50 in the U.S. market late on Monday.

DFI’s Marine Mining Yield Rises, Average Prices Up 21%

Diamond Fields International (DFI) announced Monday that it sold a total of 1,958.19 carats at its most recent rough diamond sales for an average price of $258.36 per carat, a 21 percent increase over the previous year’s average sale price of $213 per carat.

A total of 2,763.28 carats were recovered by DFI during the month of March, the company’s best month since May 2007, DFI stated in a release. Total carats recovered to the end of the first quarter of 2008 came to 5,882.74; of this, 15,626 stones were gem quality, with an average weight of 0.38 carats per stone.

Commenting on the results, DFI CEO Wayne Malouf credited “the significant improvement in ship availability, a prerequisite in our program to make the marine operation more efficient.” Most of the diamonds were mined at DFI’s marine operations which were recently overhauled.

DFI recently announced that PriceWaterhouseCoopers had resigned as the company’s auditors, effective April 23, and that DFI’s head office had been moved from South Africa back to Vancouver, B.C.

DFI is a mining and exploration company with projects in West Africa, Namibia, Zambia and Madagascar, mining diamonds, gold, zinc, copper and nickel.

Monday, April 28, 2008

DTC Hikes Prices in Response to Rising Market Prices

The Diamond Trading Company (DTC) announced an average price increase of about 3.5 percent for the upcoming Sight, the fourth this year, to begin Monday. Together with previous price hikes by the DTC, the cumulative average affect is an 8.5 percent increase in rough diamond prices since January.

The DTC said the hike will mostly affect nicer goods that result in IF - SI clarity polished diamonds.

Sight four is the first Sight this year that will not include those not selected for the new contract period. On Tuesday, the DTC is expected to publish the new Sightholders list for the 2008-2011 period. The publication was delayed by a number of weeks after questions were raised regarding statements made in the applications by a few companies that passed the Sightholders selection process.

The Sight will run through Friday.

In diamond world, brown is new white

Filed under Natural Color Diamond Association, New York :- Long the redheaded stepchild of the diamond world, earth-tone diamonds in varying shades are now emerging as a favorite son.

Just don't call them "brown.

"Marketed as "cognac," "champagne" or "chocolate," brown diamonds are in demand by today's fashion-conscious consumers who want jewelry that can be matched to their outfits.

Brown and yellow are the two most commonly found colors in the diamond world. "Common" is a relative term, however, as only one out of every 10,000 diamonds officially qualifies as a colored diamond, says Robert Mays, executive director of the Natural Color Diamond Association (NCDIA).

May recommend that jewelers who are interested in selling colored diamonds begin with the more plentiful—and comparatively affordable—browns before spending top dollar for the extremely rare and expensive colors such as pink and blue.

"Champagne, cognac and chocolate diamonds are the perfect entry point to come into the market if you want to get into the colored-diamond business," May says.

Australia's Argyle mine is the world's largest producer of brown diamonds, with a haul between $150 million and $200 million annually, according to mining company Rio Tinto. The NCDIA says brown diamonds are also found in southern Africa and Siberia.

Liz Chatelain, chief executive officer of MVI Marketing and co-founder of the Indo-Argyle Diamond Council, began working with the Argyle mine in 1989, and she says at that time, the general attitude toward brown diamonds, or "champagne," as Argyle has termed them, was negative.

"The trade has always been the gatekeepers," she says. "They did not like, or think the consumer would like, champagne diamonds. They had always been taught by De Beers that the best diamonds were white, therefore champagne diamonds had no place in jewelry."

But, she says, that started to change around 1992 when David Yurman made his first champagne-diamond piece. Brown diamonds as a category then began to pick up steam.

Chatelain says today's high-end designers mix champagne diamonds with white ones.

"It is still a small part of the diamond jewelry business but adds style and interest to jewelry collections around the world," she says.

When converted into polished diamonds and mounted into jewelry, brown diamonds constitute $4 billion to $5 billion of the world's retail diamond jewelry sales each year, or roughly 7 percent, according to Rio Tinto.

Le Vian is another well-known brand that contributes to brown-diamond retail sales.

Headed by Eddie LeVian, CEO, designer and director, Le Vian has its own brand of "chocolate" diamonds.

"The chocolate color is one that women understand," LeVian says, noting the idea of "chocolate" appeals to women more so than "champagne" or "cognac."

Celebrities who are dipping into the trend include hotel heiress Paris Hilton, tennis pro Serena Williams and Heroes actress Hayden Panettiere.

"It's everywhere," LeVian says. "They are all drawn to it."

And while the average retail jeweler won't have a great number of Grand Slam champions or Heroes as customers, LeVian points out that celebrities are no different than other women.

Jewelry, LeVian says, is no longer about a woman's husband buying her one piece she keeps her entire life.

Price points for Le Vian chocolate pieces range from $200 to more than $100,000.
Another designer cluing in to the brown trend is Justine Simmons, sister-in-law of Simmons Jewelry Co. owner Russell Simmons.

Simmons launched "Brown Sugar," which is being produced by Simmons Jewelry Co. on the Home Shopping Network (HSN) and

With price points ranging between $199 and $599, Simmons says she has designed a line that is fashionable and can be worn with everything from a ball gown to blue jeans.

Future plans call for expanding into men's jewelry and incorporating brown topaz and quartz pieces into the line.

Shades of rare

Only one in 10,000 diamonds that comes out of the ground qualifies as a colored diamond. Here is a guide classifying natural-colored diamonds by rarity of color.
—Rare: Brown, gray, black
—Very rare: Orange, yellow, olive
—Extremely rare: Pink, blue, green
—Most rare: Red, purple

GCAL achieves ISO accreditation

New York—The Gem Certification and Assurance Lab (GCAL) has received an accreditation signifying it conforms to international standards for accurate and reliable diamond grading, the New York-based lab announced on Thursday.

GCAL is the first diamond-grading lab in North America to receive this accreditation, known as ISO 17052:2005, and only one of three diamond-grading labs in the world to achieve this certification.

The accreditation means that GCAL's lab is rated among the most technically competent in the world, offering clients accurate first-time grading, less retesting, enhanced consumer confidence and greater ease in selling goods overseas.

Because the ISO accreditation is internationally recognized, exporters don't have to retest for other markets. More than 40 laboratory accreditation bodies have signed a multi-lateral recognition statement called the ILAC Arrangement, which enhances acceptance of data across the borders of member countries.

GCAL President Donald Palmieri said in a media release that the accreditation marks a tremendous milestone in the company's growth and expansion.

"We are very proud to be the first lab in this country to conform to ISO laboratory standards, and we see it as a testament to offering the most reliable and accurate grading in the industry," he said. "Our customers expect more from GCAL and we want to live up to that expectation regardless of the time, effort or cost it takes to be the best."

Friday, April 25, 2008

Belgium Decreasing Trade in Rough in March

A sharp fall in Belgium's rough diamond trade was noted in March. The country exported 13,238,024 carats of rough worth $1.026 billion, a 26.24 percent decline in volume and 10 percent decline in value over March 2007. This is a reversal of the trend seen the month before, when rough diamond exports by Belgium surged 20.11 percent by value in February.

In January, exports declined 10.08 percent in volume but increased 6.86 percent in value compared to January 2007.

Belgium's net March polished diamond trade ended with an overhang of $57.65 million worth of goods. The center imported $1.12 billion worth of goods while exporting only $1.062 billion in polished diamonds.

Antwerp traders noted to IDEX Online that currently it is cheaper to buy certain goods in New York, which could explain why imports were greater then exports.

In terms of volume, Belgium exported 804,598 carats while importing 864,486 carats, leaving the center with a surplus of 59,888 carats.

Exports of 92,693.51 carats to the U.S. were worth $261.38 million. No data on imports from the U.S. was provided by the Antwerp World Diamond Centre which publishes Belgium's diamond trade data.

Luxury Buyers Tighten Purse Strings

Retailers who serve the highest income consumers have always thought that they were immune to a recession. Historically, that has been true, more or less.

“Old-money” consumers traditionally have kept spending, regardless of economic cycles. But this time around, high-end merchants are reporting that their wealthy customers are cutting back.

Among jewelers, Tiffany & Co., the world-renowned jeweler, reported that sales of jewelry above $50,000 were modestly lower in the fourth quarter of 2007 versus the same period a year ago. Historically, this has been the fastest growing price range for the company.

Other jewelers report that their customers are shopping down. That is, they are buying a three-carat diamond when they would normally have purchased a four- or five-carat diamond. Or, those customers are re-working a piece of estate jewelry, rather than simply buying a new piece.

Other luxury merchants have reported sales slippage. Coach, Nordstrom, Saks, Neiman Marcus and others have reported either a sales decline or only a modest increase. Overseas, even brands associated with the super rich are under stress. PPR, which owns Yves Saint Laurent, Stella McCartney, and Balenciaga, as well as Compagnie Financiere Richemont, the Swiss parent of Cartier and Baume & Mercier, report that the pace of growth has slowed.

Most economists and industry watchers don’t expect the current soft retail climate to firm up until after the November presidential election. Most say that regardless of who ends up in the White House in 2009, the prospect of change will likely boost affluent shoppers’ spirits, and thus increase their appetite for luxury goods.

Niemira, the economist, points out that luxury shoppers have a more direct relationship to the stock market than other consumers. The market’s gyrations are worrisome to those consumers. “Worry is not good for the psychology of spending,” he says. In other words, luxury shoppers can still afford to spend $400 on a handbag, but they are feeling less wealthy, so they delay the purchase.

Which Merchants Benefit?

Some merchants will continue to post solid sales gains during this recessionary period. One obvious example includes retailers with international exposure. Tiffany & Company, which derives 41 percent of its sales from international markets, expects overseas stores to post significantly larger sales gains than its U.S. stores in 2008. Further, the company plans to accelerate the opening of new stores in overseas markets.

Despite some weakness at the high end, most retailers of high end goods continue to post sales gains well above mass market merchants who target middle-income consumers. If a merchant is considering moving upscale, this might be a good time to do it, according to business consultants.

IGI gets into 'green' act

New York, The International Gemological Institute (IGI) is the latest jewelry industry organization to go "green."

In anticipation of Earth Day, April 22, the IGI is announcing plans to offer grading reports printed on recycled and/or biodegradable paper using soy- and water-based inks.

The IGI Eco Report series officially will launch at JCK Las Vegas, scheduled for May 30-June 3 in Las Vegas.

According to a release from the IGI, these eco-friendly grading reports will be setting a green precedent in the jewelry industry, as IGI gemologists analyze, grade and issue thousands of reports daily for diamonds and colored gemstones.

"IGI is committed to reducing its environmental impact by offering reports in an environmentally friendly format," IGI President Jerry Ehrenwald said in a media release issued on Thursday. "We are eager to introduce the Eco Report series and urge retailers and consumers alike to help our planet."

The IGI was founded in 1975 and is located in Antwerp, Belgium; the Dominican Republic; Dubai, United Arab Emirates; Hong Kong; India's SEEPZ Zone; Kolkata, India; Los Angeles; Mumbai, India; New Delhi, India; New York; Tokyo; and Toronto.

Thursday, April 24, 2008

Jewelers Mutual to pay out $5.8 million dividend

Jewelers Mutual Insurance Co. has announced it will pay out a $5.8 million dividend to its U.S. commercial policyholders and personal jewelry insurance policyholders this spring, the largest dividend in the company's nearly 100-year history.

Each year, the Jewelers Mutual board of directors evaluates whether or not it can pay a dividend to policyholders based on specific financial criteria. As a mutual company owned by its policyholders, Jewelers Mutual has no shareholders that receive profits. Instead, the company uses profits to pay dividends, reduce rates, offer new or expanded coverages, and develop additional services.

With relatively few weather-related losses in 2006 and 2007, and policyholders' continued focus on loss prevention, the board voted to return $5.8 million to its customers, Jewelers Mutual President and CEO Darin Kath said in a media release issued on Monday.

Jewelers Mutual plans to mail the dividend checks after its annual policyholder meeting on May 21.

To qualify for the dividend, U.S.-based policyholders must have a policy in force as of Jan. 31, 2008, with a current-term written premium of $1,000 or more.

Policyholders insured for one year or longer as of Jan. 31 will receive a dividend of 8 percent of their current-term written premium. Those insured for less than a year as of Jan. 31 will receive a dividend of 4 percent.

The last dividend paid by Jewelers Mutual was $5.1 million in 2004, the year before Hurricanes Katrina and Wilma caused major damage along the southern U.S. coasts.

MVI offers Web services to jewelers

MVI Marketing Ltd., a marketing-intelligence company for the gem, jewelry and watch industries, has announced that it has acquired an interest in IT firm ITECH Solutions, a move that will allow MVI to offer Web-development services to retail jewelers and manufacturers.

San Luis Obispo, Calif.-based ITECH specializes in providing Web development, computer and network services for growing businesses, and its co-founder, Forrest Hatfield, said in a media release that studies show visitors to a Web site make a decision on whether or not to stay within just a few seconds.

"The jewelry industry is faced with a tremendous opportunity to level the playing field in the battle with its competitors," Hatfield said. "Our affiliation with MVI will provide clients with innovation, creativity, cost efficiencies and hard-core sales growth from day one."

MVI and ITECH have already begun to work on several Web-development projects for jewelry manufacturers and retailers. These include inventory management and integration, search-engine optimization, customer-relationship and affiliate-relationship management, e-commerce and shopping cart solutions, newsletter development and deployment, integrated customer-satisfaction research, viral marketing, adword campaigns, and banner development and placement.

"The trend toward online research and shopping is not going away," MVI Chief Executive Officer Marty Hurwitz said in the release. "In an increasingly tougher competitive environment, the jewelry retailer, designer and manufacturer must learn to embrace the offerings of the Web and utilize them to their advantage. With MVI's insight and knowledge of the jewelry industry and ITECH's technological sophistication, we will help the jewelry industry leverage the Web opportunity to its best advantage."

MVI is offering a free, confidential Web review and recommendations to any company that is considering beginning, expanding or improving its Web presence. For more information about this service, visit MVI's Web site,

Wednesday, April 23, 2008

Trade of coloured gems to be promoted in region

Moves are being made to boost the coloured gems and precious stones sector, which is at an infant stage in the Middle East.

The International Col-oured Gemestones Association (ICA) intends to promote the trade through its newly formed ICA GemBureau, Middle East. The bureau will be located on the top floor of the Almas Tower, headquarters of the Dubai Diamond Exchange.

“The world market for coloured gemstones is $20 billion (Dh73.4bn) per year but the volume of business generated in the Middle East is negligible,” ICA President Andrew Cody told Emirates Business. “For the next 10 years the coloured gemstones business will have a bright future because it is part of the fashion industry. If you open any fashion magazine it is all colourful except for the precious stones section, which remains largely white.

“The coloured gemstones business will improve Dubai’s image as a jewellery and precious stone business hub. We have signed a memorandum of understanding with the Dubai Multi Commodities Centre (DMCC) to promote coloured gemstones in the Middle East.

The recent decision by the Government of Dubai to reduce customs duty on coloured gemsones is a welcome step.

“There are special shops and fashion retail chains selling coloured gemstones in Europe, America and Australia but they are not popular here. The government is keen to open up the market, which will grow with the fashion industry. China is a huge market for gemstones and the ICA has signed an agreement with the government there to promote the trade.”

The GemBureau was set up by the ICA – a New York-based non-profit trade organisation – and the DMCC to meet the requirements of association members and trade representatives.

AGS Laboratories Produces Consumer Guide to Diamond Buying

American Gem Society (AGS) Laboratories launched the company's consumer guide to diamond buying, a DVD titled Diamond Buying 101, at the group's International Conclave in Seattle. The DVD features the commentary of Frank Dallahan, president and CEO of AGS Laboratories; Peter Yantzer, executive director; and Ruth Batson, executive director and CEO of the American Gem Society; as well as candid interviews with would-be diamond buyers.

At just more than 12 minutes in length the group contends Diamond Buying 101 is a practical, informative, and in-depth consumer guide to diamond buying. With a comprehensive overview, including specific examples and demonstrations, of the 4Cs; industry terms such as brilliance, fire, and scintillation; questions to ask the retail jeweler; benefits of shopping with an American Gem Society jeweler; and a summary of the AGS Laboratories, its capabilities, and grading reports. The DVD is available at no cost.

"Taking on the task of writing and producing the most honest and informative diamond buying resource for consumers could have been overwhelming," said Dallahan. "However the process, to a degree, proved cathartic. It's not uncommon to lose sight of the mission of one's company while managing day-to-day operations and activities. This project reminded us that the American Gem Society Laboratories' mission has been, and always will be, to protect and serve the consumer with the most accurate documents, the highest standards in diamond grading, and the most unbiased information. Diamond Buying 101 envelops all of these things."

Sellers Revolt As eBay Goes Corporate

FOR more than a decade, eBay has functioned as a global jumble sale where browsers can buy and sell everything from bric-a-brac to a Gulfstream jet. eBay was known for the availabilty of cheap little odds, the site was *used* to be brilliant for picking up the most absurd and unlikely things imaginable. So far-reaching has eBay's appeal become that millions have taken to disposing of their wares on its online pages. Now, however, the internet auction site is facing a revolt from some of the individual internet users that helped to establish it as a worldwide brand.

A worldwide one-day boycott of eBay, which has annual revenues of £3.8 billion, is being organised for May 1 and British users of the site are among those intent on implementing it. The internet giant was founded in 1995 and its celebrity users include Sir Paul McCartney, Johnny Depp and Cameron Diaz - Cherie Blair has admitted to bidding for shoes online.

The changes are being introduced by John Donahoe, who took over as chief executive last month. He has said he wants to upgrade eBay's image from a flea market to something more like a shopping centre.

Until now, eBay traders have been able to rate each other's conduct on the site, thereby enabling other users to judge how trustworthy they are. The system is vital in allowing small sellers to build a good reputation. It also allows them to post responses to abusive or untrue comments written by buyers. From May, eBay is banning sellers from posting feedback at all in order to avoid unjustified comments posted on buyer and seller profiles unfairly compromising their reputations. This was credited with establishing the bedrock of trust to enable strangers to buy and sell each others' goods anonymously.Only buyers will be able to post comments on the service they have received. This will leave sellers with no reply to postings that damage their reputations.

The sellers argue that the move is an excessive attempt to professionalise the site by imbuing it with the attitude that "the customer is always right" rather than the trades being a matter of give-and-take.

Tony Mills, a British eBay trader, said in an online posting: "The changes will allow buyers to be more honest when leaving feedback, it will also allow them to be more dishonest about it, too. They shouldn't be taking money from people in the first place if they think they are bad sellers."
The suspicion that eBay is favouring big business was sharpened in February when the company made changes to its charging structure.

The cost of listing items for sale was cut by up to a third, but the fee payable on completion of the sale - based on a percentage of final price - rose from 5.25% to 7.25%. Those who sell large quantities of items through the site can qualify for discounts of up to 40%.

“We are a marketplace founded on trust. While that is a very powerful proposition, it does mean that if people have a bad experience on our site, caused by a poor seller, then they will no longer use the site,” said Vanessa Canzini, a spokeswoman for eBay.

“Clearly, this is in no one’s interest, least of all our sellers, so the changes we announced recently are unashamedly focused on protecting buyers.”

Canzini said the site was not trying to alienate small users and that most sellers would see their overall fees stay the same or even decrease, while malicious comments from buyers would be removed by the company.

Justification by ebay :-

Among other changes that have hit the popular auction site, eBay will now be blocking sellers from leaving negative feedback about buyers. EBay claims that there were problems slowing down sales when buyers left negative feedback about the seller who then fired back.
Starting in May, sellers on eBay will no longer have the option of leaving negative or neutral feedback about buyers.

According to the BBC the change will affect all eBay users worldwide but sellers are not convinced this is for the better. They say it will leave them defenseless when a sale goes bad. EBay says that will not be the case.

Tuesday, April 22, 2008

Zales vs. Peers: Possible Difficulties Ahead

Filed under ZALES :- Today I would like to call attention to specialty retail jeweler, ZALE Corp, (NYSE:ZLC) and the difficult challenges it must overcome to successfully outperform the market. After a brief analysis, I have come to the conclusion that it will face many uphill challenges in the coming year. A weakening economy coupled with an inflationary environment will hamper efforts to revitalize the retail jewelry market, especially where specialty brick and mortar retailers already face stiff competition from all fronts including: booming Internet sales from as Blue Nile (NASDAQ: NILE) and Ebay (NASDAQ: EBAY), discount retailers such as Wal-Mart (NYSE:WMT), and high end retailers such as Tiffany's (NYSE: TIF).

Investors looking into Zales must keep in mind that the majority of its sales and profitability comes from the holiday season centered around Christmas. The remaining quarters are loss leaders, and produce no positive earnings per share. It will be difficult to access Zales true performance until the early 2009, when the results of the future holiday season are to be posted. Investors need to be prepared for the fact that for the next three quarters, a negative earnings per share of -.54 to -.62 is to be expected, according to a Standard and Poor report based upon forcasted operating EPS. That is a long 9 month wait for any positive news to come from Zales, where alternatively, capital could be allocated to more effective uses.

Along with the recession, and weakening consumer demand I'd like to address several issues that Zales faces in the next three quarters.


The question of Zales' success hinges on whether management has the ability to turn around an already fledgling retailer and stimulate consumer appetite amid a difficult retail environment. On the heels of Zales management is Richard Breeden, a former SEC chairman turned shareholder activist who recently acquired a 13.5% stake in Zales. There is immense pressure for Zales management to improve results, or face the prospect of a buyout. With the appointment of Neal Goldberg, former CEO of specialty apparel retailer, Children's Place NYSE: PLCE, it is difficult to say so. His new appointment at Zales retests many of the same challenges which he oversaw at the Children's Place, including a weakened demand for premium retail products, and pressure from activist shareholders such as Carl Icahn, like Breeden who have short timeframes for turnarounds. Under his previous management position as President of The Children's Place, NYSE: PLCE, he oversaw the unsuccessful merger with Disney Stores, which floundered for several years, resulting in its eventual divestiture, along with attracting a lawsuit accompanying the Children's Place and its breach of contract for non-performance. Could a disastrous turnaround plan, again, under pressure from activist shareholders tempt Zales management to pursue an opportunity of opposite synergies? A Catch-22 situation can only serve as a distraction to management as they seek to realign their core competencies towards the middle jewelry market.


Zales, being a specialty retailer, recognizes the majority of its revenue during its quarter ended Jan 31th. Earnings from continuing operations totaled just 59.2 million dollars for 2007,or an EPS of 1.21 for fiscal year 2007. Investors should note that the to a sale of bloated inventory accounted for 13% of the net income applicable to common shares for 2007. In the future, I expect that Quarter 2 results, which should be released sometime around May 31st, will undoubtedly have charges due to discontinued operations, and the planned closure of 105 stores. Severance costs which will immediately be charged to income could possibly hamper second quarter earnings, as well as a $100 million share buyback program announced on March 27th. Any savings from closures will take time to recognize as leases are broken, and payrolls are shaved due to attrition. According to an Standard and Poor report, earnings from continuing operations for 2008 are forecasted to be a negative -.61 per share.


The cost of sales category includes cost of merchandise sold, as well as receiving and distribution costs. Cost of sales as a percentage of revenues was 50.7 percent for the quarter ended January 31, 2008, compared to 48.5 percent for the same period in the prior year. According to management, this increase of 140 basis points resulted from the decision to liquidate certain discontinued and damaged inventory in lieu of refurbishing and selling the inventory through store channels. A 60 basis point charge was associated with excess inventory and a decline in revenues was recognized, associated with lifetime warranties. Interestingly the effect of gold prices may not materialize in the cost of sales. While Gold is near record high, their inventory is likely to be purchased in advance, and may therefore not materialize into higher prices one year forward, assuming an inflationary environment. However the weak dollar may also effect Zale's purchasing power, as its suppliers most likely originate from overseas, including South Africa for raw materials, and China for its labor in producing jewelry. It should be noted though, according to management's opinion, changes in revenues, net earnings, and inventory valuation that have resulted from inflation and changing prices have not been material during the periods presented (2007). And although currently not material, as stated by management, recent increases in gold prices have negatively effected the cost of merchandise inventory. In a report of risk factors in their annual report, "the trends in inflation rates pertaining to merchandise inventories, especially as they relate to gold and diamond costs, are primary components in determining their last-in, first-out inventory. There is no assurance that inflation will not materially affect us in the future". Management's success in using forward hedging contracts for inventory purchases has yet to be seen, as it will depend on them successfully speculating on the price the gold in the future, no easy task given the volatile commodities market.

Inventory and Fixed Costs.

Average inventory turnover for Zales is acceptable and in line with industry averages, yet other financial ratios indicate industry weakness. Zales has a respectable inventory turnover inline with competitors of 2.5. Compared with the Signet Group of 2.6, Tiffany's of 2.46, it is effective in managing inventory. However there are significant fixed costs which Zales shows weakness in.
Calculating revenue per employee however, shows some startling results. Revenue per Employee at Zales of $143,352 which lags behind competitors by a large margin, where Signet is able to enjoy $221,964 per employee and Tiffany's of $290,909 per employee. The heavy concentration of physical stores and mall kiosks also weigh in on margins when compared to online retailers such as Blue Nile, or big box retailers such as Walmart which can utilize retail space to adjust to seasonal demand. Clearance Items: Coupled with their recent $100 million divestiture of inventory, a casual browsing of their website will reveal some 1604 items sold at discount or at clearance prices, the largest of any category. Their aggressive buy one get one 1/2 off inventory reveals and additional 360 items. For comparison's sake, top selling items at Zales reveal 221 items, Wedding items reveal 585 items, Journey jewelry or "love jewelry" reveals 295 items. The abundance of clearance inventory relative to other categories suggests a lack of pricing power and the need to quickly reduced tied up capital in inventory. Competitors such as Tiffany or Blue Nile do not even offer clearance items which may possibly dilute the brand name.

These are some factors which I have so far considered. In closing, I prefer to look for companies which have a wide, sustainable competitive advantage, or as Warren Buffet would prospect for, a "Wide Moat". Discretionary spending of jewelry faces stiff competition, not only from the razor thin margins of Walmart and its jewelry department, but from digital competitors as well, including Internet jeweler Blue Nile, which has the advantages of having tighter inventory control as well as low fixed costs. Only the holiday of season of 2008/2009 will reveal the success of Zales management as they seek to improve upon operations. In the meantime, high valuations of Zales, and implications that it is a growth stock need to be examined carefully.

Monday, April 21, 2008

Gas prices disrupt U.S. consumer spending

Dramatic fluctuations in gas prices are disrupting U.S. consumer spending, leaving shoppers with less money to spend at retail and on entertainment and dining out, according to a new study by The Nielsen Company.The Nielsen's research shows that higher gas prices create a modest change in the number of average weekly gas trips, with consumers averaging 1.3 trips to the gas pumps per week, up from 1.24 trips when gas prices were at their lowest ($2.11 per gallon).

Gas prices have hit national records.An American Automobile Assoc. survey showed that the average price of unleaded regular is $3.53 in Miami-Dade and $3.50 in Fort Lauderdale, which is higher than the statewide average of $3.47.

With rising energy prices oil hit records above $115 a barrel this week, causing concern about the potential damage to the economy. Americans are spending a larger share of their income on energy than at any time since 1986. That has crimped pocketbooks and helped dampen consumer sentiment. Purchases of everything from cars to clothing are falling.Consumers will be spending nearly a fifth of their household budget on gas," said Todd Hale, senior vice president of Consumer and Shopper Insights, Nielsen Consumer Panel Services. "That kind of increase has a direct impact on what they can afford to spend and is something retailers will need to address."

Though consumers might be making more trips to the gas pumps each week to limit the amount they spend per trip, they are not able to limit the amount they spend on gas each week. Nielsen's study shows that the amount of money consumers spent on gas each week increased dramatically as a result of higher gas prices. Per trip spending rose significantly, up 40 percent from $24.42 per trip when gas was at its lowest price, to $34.11 when gas prices hit their peak. With consumers making more than one trip to the gas pump each week, overall weekly gas spending rose from $32.02 to $46.72 per household—a 46 percent increase.

"Consumers tell us they are combining errands and trips, eating out less and doing more things at home to counterbalance rising gas prices," Hale said. "Nevertheless, the amount of money spent on gas each week is still taking a huge bite out of consumers' budgets."
"We are all worth less and earning less than a year ago," says economist Mark Zandi of Moody's "That is why consumers are pulling back, and judging from the confidence numbers they are in a panic mode."

Energy prices, particularly at the pump, are now part of the presidential campaign. On Tuesday, Sen. John McCain (R) of Arizona, as part of a broad economic plan, proposed removing the federal tax on fuels, 18.4 cents a gallon for gasoline and 24.4 cents on diesel from Memorial Day to Labor Day.

"The effect will be an immediate economic stimulus - taking a few dollars off the price of a tank of gas every time a family, a farmer, or trucker stops to fill up," said Senator McCain in his speech at Carnegie Mellon University in Pittsburgh.

Friday, April 18, 2008

Affluent cope with economy through savvy shopping

Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue.Westlake Village, Calif.—A search for certainty, children's preferences and business discipline are shifting the affluent consumer's purchasing habits, according to The Second Annual Survey of Affluence and Wealth in America, produced by American Express Publishing Corp. and the Harrison Group.

The survey, which polled approximately 1,800 individuals with $100,000 or more in annual discretionary household income, found that 70 percent of affluent consumers are choosing to shop "high tech," using Internet strategies to identify, price, compare and sometimes buy significant fashion and home purchases online. These consumers tend to choose online outlets when they are pressed for time, when their past in-store experience did not meet delivery or fulfillment needs, and when they are unafraid of fraud.The remaining 30 percent are "high touch" and prefer to shop alone, in-store, with a knowledgeable salesperson.They tend to choose an in-person retail experience when it involves less than 30 minutes of travel time, when they want to savor the shopping experience, when they are searching for something unique and when they believe a salesperson will add value.

"Our research illustrates how today's affluent and wealthy consumers consider a variety of marketplace and lifestyle factors when making purchasing decisions, be it online or in-store," American Express Publishing Corp. President and CEO Ed Kelly said in a media release. "These customers are also searching for greater certainty in their shopping experiences—whether it's the certainty of excellent value or the certainty of quality. Clearly, it's a new game for luxury marketers and a considerable opportunity to understand and anticipate these changing behaviors and purchasing patterns."

The survey also found that the female head of household, working or not, often manages the day-to-day running of upscale households. Eighty-one percent of respondents (both men and women) said the primary responsibility for buying supplies, including groceries, household necessities, apparel and high-tech needs, is handled by the wife, compared with 26 percent by the husband.Mothers in upscale households, in turn, depend upon their children for ideas on brands to buy, places to shop, technology to deploy, vacation ideas and even "home capital spending choices." Fifty-three percent of respondents report an inclination to purchase "brands that are preferred by my children".

Meanwhile, today's well-to-do families, far removed from the current sub-prime mortgage crisis, have financial anxieties. While nearly three-quarters of respondents (73 percent) are extremely or very optimistic about their own future, only 30 percent share that optimism about the future of America, and even less (26 percent) share this feeling about the future of the world. The study reveals that the more money the respondents have, the less anxious they are.

Purchase decisions for the affluent are driven by specific needs, either to replace a product (57 percent), upgrade an existing product (35 percent) or purchase a new product for a specific occasion (35 percent).In contrast, only one-third of respondents are spurred by browsing. Purchase decisions are largely made due to personal experience (71 percent) and family and friends (37 percent), followed by point-of-sale elements such as salespeople and the in-store experience (35 percent).

Among mass media, the Internet (43 percent) and magazines (30 percent) are cited as the top purchase influencers of the affluent. Just over a quarter rely on experts and objective sources of information (29 percent), with only 19 percent relying on more traditional mass communication outlets such as radio, television and direct mail.

American Express Publishing is dedicated to informing, enriching and empowering affluent Americans, and the Harrison Group specializes in understanding affluent and wealthy markets. Together, the two companies have partnered to produce this study, which provides an understanding of the consumers at the top 10 percent of the American financial pyramid.

Thursday, April 17, 2008

Hadar Company Founder Weighs In on Skyrocketing Metal Prices

Today, Hadar is a worldwide supplier of Russian Brilliants, natural diamonds and synthetic stones and was founded in the year 2000.The Company specializes in ideal cut stones and has clients on five continents. Hadar is a full service jewelry provider, offering custom designs, contract manufacturing and jewelry repair services, all at competitive prices.

Gerry Hauser, founder of Hadar Company, advises consumers to buy jewelry only made in the U.S. these days, in light of skyrocketing precious metal prices. In addition to being founder and president of Hadar Company, Hauser also co-founded La Jolla Diamond Co. and Heritage Estate Buyers, Inc. and is recognized as an authority on diamonds and diamond simulants.

"The price for gold continues to climb to new highs, increasing from $600 to $985 an ounce," says Hauser, "and platinum values have risen from $1,100 to $2,260 -- all in the past year. Price proliferations are fueled by international demand for jewelry and investors hedging against inflation."

To compensate for the higher metal prices, Hauser says many competing companies sell rings manufactured in China. Most 14KW rings are high polished nickel over white gold and 'flash' rhodium plated. Initially, the ring will appear very shiny. This appeal can last for three to six months. Hauser says nickel over white gold can produce an allergic reaction and can potentially cause lung damage.

"These rings are outlawed for sale in most of Europe," says Hauser. "Sizing is another issue. Flame used in sizing burns the nickel. The ring will turn black. Some platinum rings manufactured in China have hollow sections or are platinum plated over silver."

Hadar continues to offer engagement rings and other jewelry items manufactured only in the U.S. Hadar does not compromise quality to compensate for the rising cost of gold and platinum. In the previous twelve months, Hadar cut internal costs to maintain stable pricing.

To further aid consumers, Hadar has implemented an Easy Pay Plan. The Easy Pay Plan allows consumers to lock in the price at the time of purchase. Buyers will not pay more because of increased metal prices. Consumers can purchase loose stones or jewelry set in the metal of their choice with a 20% deposit / monthly payments / no interest / no credit checks. Now customers can design their own ring and payment plan. For more information, please visit and

Friday, April 11, 2008

Cash forGold Offers Huge Payouts to Americans During Economic Decline

Americans affected by the recent economic downturn are selling their old, unwanted or broken gold jewelry to in exchange for enormous payouts.

"Customers are sending in material valued anywhere from fifty dollars to more than five thousand dollars," says Norm Schneider, President of

"We had one woman tell us she used the money to book a trip to Hawaii to see her son for the first time in five years... it felt great to provide her with that opportunity." is an innovative website that makes it easy for the public to sell their used, unwanted or broken gold jewelry or silver material for a "higher price than any of their competitors Guaranteed."

In a recent interview, Schneider explained that his company has seen a recent spike in large payouts due to the latest boom in gold and silver markets. "Americans realize that with the market being so high there's no reason to hold on to jewelry that would otherwise just be collecting dust." Schneider went on to add, "Our country is currently under a lot of economic pressure... people are selling their unwanted jewelry because they need cash."

Cash for Gold USA's process is simple and streamlined.Consumers request a "FREE GOLDPAK" (a pre-paid, secured and insured envelope) by calling 1-888-GOLD-808 (465-3808) or by visiting their website and filling out a Request Form for a GOLDPAK. The GOLDPAK is used to mail in the gold material.

Within 24 hours of receiving your GOLDPAK, a check will be in the mail, on its way to your preferred address. also offers electronic payments through PayPal for consumers who need cash the same day and they have a Spanish version of their website for Spanish-speaking consumers

They also recently launched an affiliate program, that offers cash to consumers looking to sell unwanted silver items such as Sterling Silver Jewelry, Silver Bars, Sterling Silver Flatware and Serving Pieces, and anything else bearing the silver hallmark.
For additional information regarding the Cash for Gold USA program or to request a FREE GOLDPAK in order to sell your used, unwanted or broken gold jewelry visit or call 1-888-465-3808. If you would like to learn more about Cash for Silver USA or Cash for Gold USA visit

About & and are both public programs funded by CJ Environmental, Inc. Their services include Precious Metal Scrap Refining, Electronic Scrap Refining as well as Dental Scrap Refining.

Thursday, April 10, 2008

Despite economy,online sales continue to climb

Americans are keen to internet marketing and according to a new study from retail sales are expected to experience sluggish growth this year, Americans will continue to flock to the Internet to buy clothing, computers and even cars.The State of Retailing Online 2008: Marketing Report shows that online retail sales are expected to increase 17 percent this year for 125 retailers surveyed.

"From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate," said Scott Silverman, executive director of "But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online."

As the number of people new to the Internet begins to wane, online retailers are constantly struggling between investing in strategies that retain current customers or those that attract new ones. According to the report, online retailers allocate 53 percent of their marketing budgets to online customer acquisition and 21 percent of marketing dollars to online customer retention. However, retailers are finding that traditional acquisition programs such as search engine or affiliate marketing may also serve as retention tools that attract existing customers as well as new shoppers.

Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report said,"What's spearheading online retail sales growth is a tale of two shoppers that visit the Web for very different reasons, The casual shopper goes online to look for the best price, leveraging the transparency of the Internet to save money. However, more affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal. Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly."

According to the survey, retailers report that search engine marketing continues to be the most effective way to reach new customers, citing 35 percent of sales coming from that initiative. As a result, nearly all online retailers surveyed (90%) use pay-for-performance search placement, and 79 percent said they will make this tactic an even greater priority this year. Companies are also using offline marketing tactics to drive customers to the web, with catalogs and other direct mail pieces taking priority over methods like television and newspaper advertising.

Though free shipping offers have proven to get some consumers over the obstacle of shopping online in the past, the study showed that retailers' are less interested in promoting free shipping options this year.While 85 percent of online retailers said they used some shipping with conditions promotions in the past, just 35 percent said that they would focus more on these types of promotions in 2008. Instead, retailers are eager to experiment with Social Computing initiatives to attract customers ' 65 percent and 55 percent of retailers respectively said that social network advertisements and widgets would be categories of increased focus this year. However, Social Computing efforts to this point have been considered more effective for brand-building and less proven for driving revenue or sales conversion. Therefore, the report advises retailers to continue investments in proven techniques like email marketing and free shipping promotions to drive sales.

Tuesday, April 8, 2008

Optimism Prevails at Baselworld

Every year the watchmakers and jewelers converge on Basel, Switzerland in the spring for Baselworld show. It is the place where exhibitors display some of the most dazzling luxury goods in the world.But the U.S. sub-prime mortgage crisis may prove to be an unwelcome guest that watchmakers fear could be a hindrance for business in the year ahead.It would be too soon to say what the outcome of Baselworld will be for diamantaires.Some are hailing the show as a great success (with plans for a bigger and better-located booth next year), while others are resigned to the fact that Basel is slow and just another necessary stop on the seemingly endless trade show merry-go-round.

Jacques Duchene, president of the BaselWorld Exhibitors Committee said the Swiss watch exports reached about 15.75 billion in U.S. dollars (16 billion Swiss francs) last year, a 16 percent increase over the previous year, and a rise of more than 50 percent over the previous four years, in a press conference,the day before the show opens.But despite the good news, economic troubles of recent months are worrisome, and companies should be prepared, Duchene said. He noted, however, that the Swiss watch industry is optimistic for 2008 since new markets in other parts of the world are developing, with Swiss watch exports to Russia up 57.4 percent and exports to China up 43 percent, for instance.

Vimal Lakhani, managing director of Kiran Gems, said the quantity of the people isn’t worrying him – he is interested in the quality, and this Sightholder, which specializes in white goods under 25 points, is seeing all the people it needs.“We are exhibiting for the first time for three reasons,” he says. “It’s a brand building exercise, we want to continue our relationship with our existing customers and we are looking to find new clients.”

According to Avi Paz of the Israel-based Avi Paz Group ,58 percent of exports goes to the U.S.therefore it would impact his trade but he also said there is a positive side to the decrease in the value of the dollar that people should not forget. “The interest rate of the dollar, which forms a lot of our expenses, has dropped. Fewer expenses will give us some oxygen, which is very important for our industry.”However being optimistic he said the U.S. will not affect him too badly,because of his philosophy of not concentrating on only one market and “We should not forget about the U.S., though,” he said. “We have to take care of it, even if it is going down.”

As for 2008 watch models, the Swiss will roll out original large chronographs for many of its new 2008 models, including ladies' chronographs that offer some innovative mechanical functions, said Francois Thiebaud, president of the BaselWorld Swiss Exhibitors Committee.Big cases, pink gold and jewelry-style watches for men are also on tap at this year's show.

Crossing borders through the Net to Sell Jewelry

eBay Live Auctions is slowly being inundated with sellers of jewelry hailing from Thailand and India. These companies state within their online bidding agreements that buyers/bidders are subject to dispute arbitration under California law. In addition, those residing in California are subject to paying sales tax on their purchases. However, the sellers have no physical address in the United States..huh? While the Bidder Agreements are to be construed under California laws, these companies display physical addresses (according to their web site registrations) in countries such as Thailand and Greece. Contact information posted on associated web sites for these sellers displays international telephone numbers.

In reviewing eBay Live Auction (within the jewelry category), the product being offered (according to Feedback left by buyers) is either great or sub-standard. One seller received dozens (did not have the time to count all of the pages) of negative feedback (from just one buyer)who has so many claims against the seller, as to make one wonder who's policing eBay Live auctions. If there was ever a time where an inordinate amount of promotional gemstones and industrial diamonds, were being hawked on the Internet, those offering goods out of India and Thailand must have truly cornered the market. These sellers are using words to describe gemstones as Fine, AAA, AAA++++++, Natural, Authentic and just simply out of this world. The non-stop jewelry auctions on television are entertaining, however, the sellers out of Thailand and India are truly making a concerted effort to inundate the U.S. market with product that is simply appalling in both design and quality.

The true asset test for the rings with super sized big stones would be to drop them in a glass of warm water and see if the water turns the color of the gemstone. What's even more amusing is the certificate of authenticity that comes along with the purchase of a so-called Fine 25.00 Carat Emerald and Diamond Ring. There are four or five sellers all selling the same product at whatever price the market will bear.What's even more astounding is that all of these auctions are running in the same line. Seems that one seller out of Thailand, manufactures goods to a number of other sellers. In other words, all of this product (which is high priced and would not stand the acid test of a "real" appraisal) is all coming from the same place.

Then comes the notion of why would anyone residing in the United States buy jewelry from anyone in Thailand or India and pay the high shipping costs and duty? However, if one wants to return an item, they can send it back to the concerned addresses. Are these companies domiciled in California, Thailand or India?

Want to buy jewelry or gems? How about a visit to your local jeweler in your own hometown? If you want to buy it on eBay, buy from legitimate (domiciled) companies that you can actually contact without having to dial a country code.