Archive for Retail
What Mark Vadon is not Telling his Investors
Posted by: | Comments
Have a look at the following interview of Mark Vadon, Founder and Executive Chairman of Blue Nile, Inc (NILE) on Bloomberg TV:
On November 8th, after the market closed, Blue Nile announced their Q3 financial results. Overnight their stock plummeted from a closing price of $48.81 to an opening of $35.45 on November 9th. The stock closed even further down the following day at $32.82. Within 24 hours, the company had lost almost a third of its value.
Mark Vadon, Courtesy of BusinessWeek
The main driver behind the collapse was the fact that Blue Nile’s net income for Q3 2011 fell to $1.9 million from $2.8 million in Q3 2010 – this despite increasing revenues over Q3 2010 by $7.5 million (an increase of 11%).
Unfortunately, the clip above plays more like an informercial than it does a journalistic interview. The interviewer doesn’t even mention the disappointing earnings, unfavorable outlook, or even the suddenly resigning CEO. So what really is going on with Blue Nile?
I believe the answer is revealed not in what Vadon says in the interview above, but rather in what he doesn’t say.
At about the 4:30 mark in the video above, Vadon says “online, there isn’t much competition for us.” Robert Bates, from JCK Magazine, takes Vadon’s claims at face value. But is this really the truth?
According to comScore, online jewelry sales in the third quarter have grown “over 15%” compared to the third quarter 2010. Blue Nile’s sales growth for the same period was 11%. So if Blue Nile has no competition online, why is it that they’re lagging so substantially behind the online jewelry industry as a whole?
New Diamond Jewelry Rental Service Available from TheKnot.com
Posted by: | Comments
From JCK Online:
JCK reports that all-things-wedding website, theknot.com, has opened an online boutique showcasing diamond bridal jewelry for rent supplied by Adorn Brides.
The new boutique showcases a selection of diamond bridal necklaces, earrings and bracelets available for rent.
Adorn Brides’ pieces range in retail value from a few thousand dollars to over $100,000, but are rented for a fraction of the item’s retail value.
I think this is a fantastic idea. Any reader of my site knows I’m all for spending less on jewelry and diamonds and more on the important things in life. The reason for being of this site is to promote an approach to buying diamonds to buy only the minimum.
From Gerson Lehrman Group:
For those of you who follow my blog, you know already that I’m a big fan of jewelry industry analyst Nicholas White from the Gerson Lehrman Group. This time, he writes about how critical consumer credit is for the retail jewelry business, and how, unfortunately, at this time, consumer credit is plummeting at record rates. He believes this will make any Fall recovery for the jewelry business highly unlikely. Zales, who he claims pioneered easy customer credit in the business, reports that approximately 41% of purchases are made using its revolving 3rd party credit card program. Sterling Inc, parent company to Kay Jewelers and Jared Galleria of Jewels, reports about 53.2% of purchases made with the company’s own in-house credit card in FY 2009.
That was a 60 base point increase over the previous year. The company attributed that increase to “higher level of applications offset by a significant increase in the level of credit applications rejected,” despite last years sales decline. Unfortunately, Signet’s US brands may not have the luxury of an increased level of credit applications this Christmas season if the credit contraction continues or worse yet, deepens.
That’s exactly what some analysts expect to happen this fall, “believ[ing] consumer spending declines have only just begun.” They back this up saying, “personal incomes and real incomes have had steeper declines than most had expected” as well as point to the fact that “wages and salaries have also declin[ed] by 4.7% from June 2008 to June 2009”.
However, this isn’t just a problem for Signet and Zale. Credit is an important part of almost all modern mid-price jewelry companies business. Clearly, this contraction will have a material effect on jewelry sales, especially the higher price point diamond ones. Concluding, “based on what I [analysts] see, which is beyond the headline numbers, there are growing, not shrinking, problems that have yet to come to light. Government spending will only create a short-term improvement before it is exhausted. Ditto!
Zale Debuts their own Little Blue Nile Killer
Posted by: | CommentsFrom National Jeweler:
Zale Diamond Corporation has debuted a new section on their website called the “Prestige Diamond Collection.” It’s billed as an “online custom engagement ring service,” which seems like fancy talk for the same “build your own ring” feature that just about every other online diamond vendor has been offering for years already. A quick look at their site does reveal some impressive features. They seem to have a very large selection of rings broken down in three categories: Solitaire, Solitaire with Side Stones, and Vintage. Each style is available in a host of different metals (14K and 18K Yellow and White Gold, Platinum, and Palladium). But that’s pretty much where the accolades end. Unfortunately, the diamond selection is filled with the same garbage you would expect to find in a mall store. I scrolled down to some 1 carat diamonds in the $3800 range and almost wretched when I saw an I SI2 diamond with a 78% depth (yes, that’s right 78% depth! That’s awful for a princess cut. For a round diamond, it’s a crime). It has a diameter of 5.61×5.53. Thats about the proper diameter of a nicely made 0.60 pointer. I’ve seen some very ugly one carat diamonds in my day, but I don’t think I’ve ever seen one this bad.
To be fair, they do seem to have some nicer diamonds mixed in, but it’s precisely this “mix” that is what’s so troubling. There’s no cohesive message being broadcast here. On the one hand, it’s called the “Prestige Collection,” but on the other hand, they’ve got complete garbage diamonds mixed into their list.
Bottom Line Recommendation: Stay away. Buy from the more reputable online vendors. Their diamonds are better, and their profit margin is less. Feel free to contact me if you have any questions.
Apparently Women Prefer Home Decor to Diamonds!
Posted by: | CommentsFrom The News & Observer:
The News & Observer reports on the annual “If Your Walls Could Talk Survey” by Kilz Roller and comments specifically on the one notable and interesting find of the survey – a full 85% of women surveyed said they would prefer a $5000 home makeover to a pair of diamond earrings of equal value. Of course, this needs to be taken with a giant grain of salt considering the source. Kilz is a brand of paint roller (hence, Kilz Roller), so they clearly have a vested interest in the survey’s outcome.
Sterling Inc being Sued for Pay Discrimination
Posted by: | CommentsFrom Cleveland.com:
Sterling Inc, the US subsidiary of Signet Inc of the UK, and parent company of Kay Jewelers, Jared Galleria of Jewels, and several other smaller regional chains, is being brought to arbitration on behalf of thousands of female employees. They are accused of discriminating against female employees.
This case has the potential to become the largest pay discrimination case ever arbitrated in the United States. In the end, it could potentially include 20,000 female employees.
Against the Grain: Cartier’s Bamberger isn’t convinced “the Worst is Over”
Posted by: | CommentsFrom Bloomberg:
There’s endless chatter in the jewelry business now about how the “worst is behind us,” the “green shoots” are taking root, and things are steadily improving. It’s pretty much pervasive across all sectors of the business these days. It seems to dovetail quite nicely with the prolonged rally in the stock market. People are feeling good again.
But Cartier UK Managing Director Arnaud Bamberger disagrees.
“I’m not sure that the worst is over,” said Bamberger, speaking outside the company’s marquee at the Cartier Polo finals in Windsor Great Park near London on July 27, as actress Anna Friel, socialite Poppy Delevingne and former Spice Girl Geri Halliwell entered the 162-year-old jeweler’s enclosure. “We will lose a bit of turnover. We were maybe more ready than other companies for this big recession, and therefore already have taken a few actions so we wouldn’t be too much hit.”
