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14 April 2009
Petra Diamonds to Auction Cullinan Blue Gems
Petra Diamonds has announced intentions to auction its rare 7.03-carat diamonds.
Officials said the centrepiece of the upcoming Sothebys Sale of Magnificent Jewels will be their important and rare fancy vivid blue, internally flawless, cushion-shaped diamond weighing 7.03 carats.
In a statement released by Russell and Associates in Johannesburg on March 31, 2009 and made available to East African Business Week, the diamond was cut from the 26.58-carat rough stone discovered in 2008 at Petra Diamonds historic Cullinan diamond mine in South Africa.
The pre-sale estimate is between US$5.8 and US$8.5 million and the buyer will have the honour of naming the diamond.
At a weight of 7.03 carats, the diamond ranks among the most important blue diamonds ever to be offered for sale by Sothebys.
The Gemological Institute of America (GIA) has graded the stone as fancy vivid blue in colour and internally flawless in clarity, the highest possible grading for a blue diamond.
"Blue diamonds, which are among the rarest of all gems, owe their colour to the presence of the chemical element boron during the stones formation. The Cullinan mine is the worlds most consistently reliable source of blue diamonds and this stone is a perfect example of Cullinan diamonds at their best," the statement said.
A marketing programme to exhibit the diamond in Hong Kong, Paris, New York and London has been arranged by Sothebys ahead of the sale to be held at the Beau-Rivage Hotel in Geneva, Switzerland on May 12, 2009.
Johan Dippenaar, Chief Executive Officer of Petra Diamonds commented: "This fancy vivid blue, flawless diamond is a very rare and unique gem.. Its quality is enhanced by its Cullinan origins, a mine that has produced some of the worlds most famous diamonds."
David Bennett, Chairman, Europe and the Middle East, Sothebys International Jewellery Department, said: "Blue diamonds are among the rarest of all natures treasures and it is very exciting to have such a fine example as the centrepiece of our forthcoming Geneva Magnificent Jewels Sale."
"This stone certainly ranks among the most important blue diamonds that I have had the privilege of offering for sale in my career at Sothebys and what makes it particularly special for us, is that weve been able to follow its production from the initial rough state through the various stages of its cutting and polishing," Bennett added.
Petra Diamonds has five producing mines in South Africa - Cullinan, Koffiefontein, Helam, Sedibeng and Star; and has also reached agreement to acquire, from De Beers, the Kimberley Underground mines.
In Tanzania, Petra has recently acquired a 75% interest in Williamson mine at Shinyanga.
9 April 2009
De Beers Diamond Sales Advance, Remain Below Normal
April 9 (Bloomberg) -- De Beers, the world’s largest diamond producer, said sales are rising this year after demand plunged in 2008 because of the worldwide economic slowdown.
“While still at lower-than-normal levels, sales have been steadily increasing since the end of last year,” spokeswoman Lynette Gould said in an e-mailed statement, dated yesterday. Cash flow was positive in March, and the Johannesburg-based company is “optimistic” about meeting annual goals, she said.
De Beers suspended mining in February at a joint venture in Botswana that produces a fifth of global diamond supply and said it would borrow $500 million from shareholders. Rio Tinto Group and other mining companies have cut production and jobs after the worst recession since World War II hurt jewelry demand.
Shutting mines and cutting jobs may help De Beers, 45 percent-owned by Anglo American Plc, to remain profitable even at “significantly lower level of sales,” Gould said. De Beers may save more than $1.5 billion of planned expenditure this year, she said. Diamond mines in Botswana probably will return to operation next week, the statement shows.
The producer’s sales may halve in 2009 after diamond prices fell at least 30 percent during the past year, the Financial Times reported today.
The newspaper reported one of several scenarios considered and not necessarily the most likely one, Gould said. Spending was cut to the extent that the company would remain profitable even if sales were to fall by 50 percent, she said.
De Beers said Jan. 20 it would reduce the amount of rough gems, or diamonds that aren’t cut or polished, offered to clients by about half until April.
Diamond prices fell 7 percent in the first quarter after slumping 9.2 percent in 2008, according to a PolishedPrices.com index. Tiffany & Co., the world’s second-largest luxury-jewelry retailer, reported a 76 percent plunge in fourth-quarter profit last month after even the wealthiest shoppers spent less.
Rough diamonds don’t trade on commodity exchanges. Instead, De Beers -- which sells about 60 percent of the world’s uncut gems -- holds 10 annual sales, known as sights, to selected customers from Belgium, Israel and other countries known for diamond-cutting.
The Debswana venture, which is 50 percent-owned by Botswana’s government, is expected to resume production at its Jwaneng, Orapa and Letlhakane mines on April 15, Gould said. The venture produced 32.3 million carats in 2008.
8 April 2009
IDMA announces plans for international meeting
AFNS] ANTWERP, BELGIUM, 8 April 2009 – The International Diamond Manufacturers Association (IDMA) Presidents Meeting held in Antwerp announced plans to host an international conference of diamond industry bankers and service providers. The meeting will ensure that all players in the diamond supply pipeline are implementing sound and sustainable credit and business practices.
IDMA President Moti Ganz said that the organization, which is the representative body of the worlds diamond manufacturers, seeks to facilitate an open exchange of views with the aim of creating a sustainable diamond supply pipeline that should ensure a stable and viable long term growth of the diamond industry.
During these challenging times, IDMA urges the diamond industrys financial institutions to continue their support for the diamond industry and their clients based upon sound and transparent business practices.
"The current economic crisis has made it apparent that were living in a different world where new rules apply," Ganz said. "Therefore, it is important that we organize a high-level conference with the banks -- our financial partners and credit providers -- to discuss what new financially sound business models we need to implement," the IDMA President stated.
8 April 2009
Diamonds - an investors best friend?
Some investors worried about the financial crisis are putting their money into these slow, steady earners.
A growing number of Polish investors are sheltering their money from the financial crisis by investing in diamonds. According to P½emysl Synek, general director of Diamonds International Corporation (DIC), the price of diamonds has risen for the last 100 years and annual growth on the global diamond market has come in at between three to seven percent over the past 20 years.
"Every wise investor diversifies his wealth and diamonds are one means of investing money; they are considered the second safest [investment] after gold," said Synek, whose Czech-based company was established in 2005. Its Polish subsidiary was launched a year later.
REKLAMA Czytaj dalej
In mid-2007, when the first signs of a global slowdown started to become visible, the diamond industry noted a significant rise in demand. Then in 2008, due to the falling US dollar, diamond prices jumped by as much as 50 percent, according to Synek.
"At the end of last year the yield stabilized at nine percent annually, which can be considered a success, given the crisis circumstances," he continued.
David Franke, CEO of DIC PL, explained the appeal of diamonds. "They are a world currency, can be capitalized quickly and are hard to destroy. Plus diamonds are a symbol of fashion, success and social status," said Franke.
Investments can start at a one carat gem, and a stones cut, color and clarity are all taken into consideration when assessing its value. For example, a high-quality four-carat stone is worth around E120,000 (zł.563,800).
Asked about negative associations with diamonds, particularly African "blood diamonds," the company explained that it is a member of the Antwerp Diamond Bourse (Beurs voor Diamanthandel), which carefully monitors the source of diamonds.
8 April 2009
D Flawless marquise diamond earrings sell for HK$13 million
April 8 (Bloomberg) --
The top jewelry lot was a pair of marquise-shaped D-color flawless diamond earrings, weighing 16.58 carats in total, which fetched HK$13 million. Diamonds graded D are considered colorless; a carat is one-fifth of a gram.
Sotheby’s said mainland Chinese clients were among the top buyers. Of the 10 priciest watches sold, four went to Chinese bidders, said Vanessa Herrera, head of the watch department.
“We saw a number of new buyers from mainland China, many of whom were transacting at levels that we have not seen,” Quek Chin Yeow, Sotheby’s head of jewelry department and the deputy chairman for Asia, said in a statement.
Diamonds outshone jadeite, which doesn’t have an established resale market. Competition was especially fierce for diamonds of 5 carats or larger with few flaws.
The sale continues today with the auction of Chinese ceramics and other artifacts, including an 8th-century tortoiseshell vanity box given to Japan’s Emperor Shomu that’s expected by Sotheby’s to fetch more than HK$40 million.
Sotheby’s buyer’s commission is 25 percent of the hammer price for the first HK$400,000, 20 percent for between HK$400,001 and HK$8 million, and 12 percent above that.
5 April 2009
Found on the Street: Jacket with Pockets Filled with Diamonds
2 April 2009
Polished Diamond Prices Mostly Steady in March
(April 2, 09, 15:04 Ken Gassman)
Much like stock prices on the world’s financial markets, polished diamond prices appear to have stabilized in the past month or so, based on the IDEX Online Polished Diamond Price Index. Average polished diamond prices declined in March 0.6 percent versus average diamond prices during February and dipped by 7.3 percent versus March 2008.
In one or two specific categories, prices seem to be inching up, though it is far too soon to call this a trend. However, there was some price weakness – which we view as temporary – at the end of March.
Prices of larger diamonds – 3 carats and up – appear to have stabilized around the long term trend line, after their price bubble burst in late 2008. While prices of smaller diamonds – 2 carats and lower – appear to be in a holding pattern, they are selling at prices below their long term trend line.
We believe that demand for larger diamonds may have stabilized for two reasons: 1) investors have been focusing on larger stones; and, 2) very high-end old-money consumers are not as pinched as newly wealthy consumers who had been buying large stones. It appears that some of these old-money shoppers are in the market seeking bargains in superior quality polished diamonds.
On the other hand, in the U.S. market, demand at the mass market – typically where most 0.5 to 2.0 carat diamonds are sold – has recovered more solidly than demand at the high end. For example, Sterling Jewelers (Kay, Jared and regional brands) reported that its same-store sales were down only 2.7 percent for February and most of March. In contrast, Tiffany indicated that its U.S. same-store sales were down in the low 20 percent range for the same period.
Overall, despite negative numbers, the sales figures for Sterling and Tiffany are encouraging (we never thought we could say that a 20 percent decline in same-store sales was positive). Here’s why: in the 2008 holiday selling period, Sterling’s same-store sales fell by16.4 percent, so a recovery to a 2.7 percent decline represents a real victory. For Tiffany, its same-store sales fell by 39 percent in November, and have now recovered to a decline in the low 20 percent range. The absolute numbers aren’t pretty, but the sales trends are clearly positive.
Further, there are anecdotal signs that the American consumer – optimistic by culture – has had enough bad news. The media is being bashed for being so negative. For example, Stephen Joyce, CEO of Choice Hotels (5,800 hotels with 470,000 rooms), said, “When we stop barraging people with bad news, they will take a deep breath and go back to work.” (Financial Times, March 30, 2009). Forbes.com just published an article in which the writer irresponsibly began with these words: “Sadly, someday this recession is going to end.” The media won’t have anything unpleasant about which to write, if the recession ends.
Consumer confidence is not a harbinger of consumer demand – despite what the mass media claims – but it appears to have stabilized in March. At least, consumers aren’t feeling any worse.
In our opinion, we are probably past the worst of the recessionary environment. In the U.S., most economists, along with the Federal Reserve, believe that the American economy will begin to recover sometime in 2009. America’s government was very aggressive in the steps it took to keep the economy from plunging into a depression. In fact, it has been much more aggressive than any other country in the world (some would argue that President Obama implemented recovery programs so quickly that he was heard to say “Ready, Fire, Aim.”) Whatever you believe, the American economy is substantially more stable and resilient than most people understand.
Because of the strength and resilience of the American economy, we believe that diamantaires who have deserted this huge market – representing an estimated 50 percent of global diamond sales – in search of emerging markets elsewhere in the world may have made a strategic error. There may be pockets of vibrancy here and there in overseas markets, but the aggregate spending power of consumers in those markets is far too small to make them viable for diamantaires over the long term.
March Polished Diamond Price Trends Encouraging
Based on March data, polished diamond prices are no longer in a free fall, according to the IDEX Online Global Diamond Price Index. After peaking last summer, polished diamond prices declined sharply beginning in October 2008, a trend that continued through January. However, while diamond prices softened during the last week of March – a temporary anomaly, in our opinion – they have stabilized from prior months’ weakness.
While diamond prices fell through the long term trend earlier this year, we are not particularly concerned. Actual prices move up and down to generate what mathematicians call a “sine wave.” Much like waves in the ocean, prices are characterized by sine waves which surge, reach a peak, then pull back substantially, only to build, surge, and wane again. We believe that we may be near the bottom of the sine wave for polished diamond prices, based on a mathematical analysis of the current diamond price trend line. Will reality follow the mathematical projection? Only time will tell. (Still confused about a “sine wave?” Google it and read Wikipedia’s explanation.)
Monthly Polished Diamond Price Trends:
March 2009 versus February 2009: (0.6 percent)
For the month of March, average global polished diamond prices declined by a miniscule 0.6 percent versus average diamond prices during February. This represents a reversal of substantial month-to-month price declines that we experienced earlier this year. We view this as a positive sign.
Further, it reflects a general stabilizing of financial and commodities markets around the world. Diamond prices began to soften in the early fall of 2008, after almost six months of unusually high inflationary pricing for polished stones.
On an annualized basis, March’s price decline represents about a 7 percent annual deflation rate for polished diamonds. Compared to prior months – February’s decline was about 50 percent on an annualized basis – March’s price decline is a welcome respite from the bad news coming out of the market in recent months.
The current deflationary trend is beneficial to downstream participants in the diamond pipeline since their margins have been squeezed for sometime, with a particular tightening in 2008.
We believe history is a great forecaster for the future. As we have seen in March, the rate of diamond price deflation has begun to moderate. The longer term inflation rate will return, in our opinion, perhaps this year or by 2010. The IDEX Online Polished Diamond Price Index, calculated on the average daily, stood at 109.96 for the month. At the end of March, the IDEX Online Polished Diamond Price Index had slipped to 109.17, reflecting weakness that we view as temporary. The IDEX Online Polished Diamond Price Index stood at 100.00 in July 2004.
Beginning in the first quarter of 2008, polished diamond prices showed large gains during every month in the first half of the year. Since then, prices have generally decreased as consumer demand has weakened.
March 2009 versus March 2008: (7.3 percent)
On a year-over-year basis, global polished diamond prices dipped by 7.3 percent in March versus March 2008. This was the ninth consecutive month of deceleration of year-over-year price increases for polished diamonds, and it was the third month that year-over-year prices dipped. At first glance, March’s year-over-year deep price decline appears to be worrisome, but upon further examination, it is less of a concern. Polished diamond prices began their surge in March of 2008, so comparisons against those “bubble” prices look unfavorable. In subsequent months, we could continue to see significant percentage declines, but they are more of a mathematical anomaly than a reflection of reality. While this measure has dipped below the historical trend line annual inflation rate of 3-4 percent, we believe that diamond prices will return to their historic annual inflation in the future.
The historical inflation rate is sustainable, in our opinion, over the long term. While some forecasters are predicting a “new economy,” diamonds and diamond demand have remained more or less on the sidelines during the recent turmoil in the commodities markets. Thus, we believe that they are more likely to remain relatively untouched in the future, once the U.S. and the global economies stabilize. Based on 50,000 or more years of solid demand based on archeological and historical evidence, we do not expect to see any major shift in consumer demand for diamonds or other jewelry as the future unfolds. Further, diamonds are a “green” purchase. That is clearly something that other luxury goods cannot claim. Finally, we believe that polished diamond prices will ultimately reflect market demand and supply; when demand stabilizes, prices will stabilize. The IDEX Online Polished Diamond Price Index stood at 109.96 in March 2009 versus 118.62 in March a year ago.
Prices of Larger Diamonds Stabilizing
In March, price declines slowed, especially among the larger diamond sizes – 3 carat and above.
Forecast: Diamond Prices May Be Stabilizing
We’ve been surprised to see that the descent of polished diamond prices has slowed. We had been forecasting further significantly softening. But, as they say on Wall Street, “don’t fight the tape.” The polished diamond price trends we’ve seen in February and March are encouraging. Diamond prices have remained far less volatile than stock prices, so we think the current trends may suggest that the market has about reached bottom. Unlike the stock market which will continue to test historic lows before it moves solidly into bull territory, diamond prices don’t move quickly, and thus, won’t be testing for the low point.
It’s not time to celebrate, but unless we get some surprises in April and May, we may have seen the worst.
The IDEX Online Diamond Price Index
The IDEX Online Diamond Price Index is a real-time index derived from actual asking prices in the global diamond industry. The IDEX Online Diamond Price Index objectively reflects price trends as they happen. The Diamond Index and Diamond Drivers were formulated following comprehensive research and analysis of the IDEX Online inventory database, aggregated since 2001. Research and development were conducted in cooperation with Dr. Avi Wohl, Senior Lecturer of Finance at the faculty of Management, Tel Aviv University, Israel.
2 April 2009
GROWING INCIDENCE OF UNDISCLOSED TREATED DIAMONDS IN AUSTRALIA
DCLA Warns of Undisclosed Treated Diamonds In Australia
(April 2, 09, 10:17 Edahn Golan)
The Diamond Certification Laboratory of Australia (DCLA) said on Wednesday that it has been seeing a growing number of treated diamonds being submitted to the lab as natural diamonds.
Following is the warning DCLA published on its website and via email:
DCLA has seen an alarming increase in the number of treated diamonds being submitted as natural diamonds to the laboratory for certification.
It should first be said that diamond treatments are neither good, nor intrinsically bad in and of themselves. There is nothing wrong with buying a treated diamond, provided that the treatment is fully disclosed and that you pay the appropriate price for the diamond. Because of their lower cost and value, treated diamonds can allow a person to buy a diamond that appears to be of a higher quality than it truly is.
However, too often the presence of such diamond treatments is concealed. Whether this deception is by intent or negligence, such concealment is tantamount to fraud.
Not only does artificially treating a diamond significantly reduce its value, but most diamond treatments are unstable and reversible. For this reason, all internationally accepted rules for diamond grading forbid the certification of treated diamonds. An extremely disturbing discovery just recently in the DCLA Laboratory was that of a coated diamond accompanied by a certificate from a supposedly legitimate Australian ‘laboratory’.
Members of the diamond industry have a responsibility to consumers to convey accurate and transparent information, and each individual that handles a diamond as it moves down the diamond pipeline from the mines should be held accountable for making known any treatments that a diamond has undergone.
It is deceptive and unfair to fail to disclose treatment of a diamond when it has a significant effect on a diamond’s value. In its pursuit of consumer protection, DCLA is offering a ‘Diamond Amnesty’ for diamond owners Australia-wide – any diamond brought in with its matching diamond grading certificate will be verified for grading accuracy and tested to ensure that it is natural and free of treatments. This service will be provided free of charge.
2 April 2009
Jewelry Demand Seems to Have Stabilized for Tiffany
The media’s doomsday naysayers, along with the bears of the investment world, were probably disappointed with Tiffany’s fourth quarter and full year results. Not only were earnings (excluding unusual items) above management’s forecast, but a drill-down analysis into the company’s sales trends indicates that demand has stabilized, and the trend seems to point toward improving results.
We note that it may have been hard to discern these encouraging bits of news based on the company’s news release, but you need to remember: SEC lawyers dictated how the financial results must be disclosed.
We’re not sugar-coating Tiffany’s results for the fourth quarter and year: they were extremely disappointing. However, they represent a broad view of the period. For example, Tiffany’s U.S. same-store sales declined by a whopping 33 percent in the quarter. Month-by-month, they were down 39 percent in November (versus +7 percent in November 2007); down 33 percent in December (versus -5 percent in December 2007); and, down 23 percent in January (versus flat in January 2008). It is clear that, after adjusting for the prior year’s comparisons, Tiffany’s sales decline has been moderating since its woeful November performance.
However, management did note that the sales decline appears to have hit a plateau in the first quarter – the decline is no worse, nor no better, than fourth quarter trends. In our opinion, that is reason for encouragement. Comparisons against last year are reasonably difficult, with worldwide sales up 8 percent (constant currency) in last year’s first quarter, so a worldwide sales decline of 20 percent or slightly more in the first quarter of this year isn’t as bad as it might seem initially.
Fourth Quarter Results Analysis
Tiffany’s global net sales declined 20 percent in the fourth quarter. However, excluding the impact of currency swings, global net sales declined by 19 percent and global same-store sales declined by 23 percent on a constant currency basis. “Constant currency” comparisons show the underlying demand trends, since currency swings are eliminated. However, GAAP (Generally Accepted Accounting Principles) require companies to report results including currency swings; we believe this distorts results for multi-national companies such as Tiffany.
Sales in the Americas – including the U.S., Canada, and Latin American/South American stores –declined by 29 percent in the fourth quarter. Difficult economic conditions in the U.S., coupled with heavy price-based promotions by competitors, hurt demand for Tiffany’s merchandise.
In the U.S. market – 76 stores – total sales declined 30 percent in the fourth quarter, and same-store sales dropped by 33 percent. Both the number of transactions and the average ticket fell in the fourth quarter in Tiffany’s U.S. stores. The table below summarizes additional detail about Tiffany’s U.S. sales as well as sales in other global markets.
Tiffany management noted that its sales per gross square foot of store space in its New York Flagship unit were about $6,500 last year. This compares to the typical independent jeweler’s sales of $483 per square foot, according to the Jewelers of America (JA) Cost of Doing Business Survey (2007 edition). Tiffany’s New York Flagship store on Fifth Avenue represents about 10 percent of corporate sales, or about $286 million, more or less. That’s the equivalent of about 285 independent jewelers, based on JA statistics that show the typical independent generates annual sales of just over $1 million. Tiffany is an AGS (American Gem Society) jeweler – these jewelers tend to be higher-end merchants whose methods of doing business are superior to other jewelers; the typical AGS jeweler generates annual per-store sales of just over $2.4 million. Thus, Tiffany’s New York Flagship store generates about the same amount of business as about 120 typical AGS stores.
Tiffany’s five highest volume stores in 2008 were – in order – 1) South Coast Plaza in Costa Mesa, California; followed by stores in Chicago, San Francisco, Beverly Hills, and the Washington, DC store in Vienna, Virginia.
Every price strata reflected a sales decline. However, the sales decline was more modest in merchandise priced below $500 and above $50,000.
In the U.S., sales to Americans declined by about the same amount as sales to overseas tourists. As the U.S. greenback strengthened near the end of 2008, overseas tourists’ trips to the U.S. – along with their spending – declined. For the full year, sales to foreign tourists who shopped in Tiffany’s U.S. stores represented 16 percent of U.S. sales versus 14 percent in 2007 and 11 percent in 2006. The very weak U.S. dollar early in 2008 helped boost tourist spending in the first half.
Tiffany’s online and catalog sales declined by 20 percent in the quarter due to a lower number of orders shipped. The average ticket held relatively steady. There was a modest decline in the number of catalogs mailed in 2008, a trend that will continue into 2009, as more customers shift to ordering goods online rather than via the catalog.
In Canada, Tiffany posted “healthy” sales growth in the fourth quarter. This was in stark contrast to Birks & Mayors which posted an 18 percent same-store sales decline for its fourth quarter.
Sales for Tiffany rose in Brazil, but were soft in Mexico during the fourth quarter ended January 2009.
Sales in Tiffany’s “other” channel declined by 71 percent in the fourth quarter due largely to reduced wholesale sales of diamonds. In addition, results from the under-performing Iridesse pearl stores are included; this division will be shut down gradually during 2009. Sales in the “other” channel were a mere $66.7 million for the year, or about 2.3 percent of corporate revenues, an inconsequential level.
During 2008, Tiffany opened 22 new stores, and finished the year with 206 locations in 21 countries. This is a 12 percent increase in the number of Tiffany locations, and a 9 percent increase in square footage. The company operates 935,000 gross square feet, including 600,000 in the Americas, 242,000 in the Asia-Pacific region and 93,000 in Europe.
By merchandise category, high-end statement jewelry sales posted a worse decline than the company average. This correlates to other trends that we are seeing. For example, the Financial Times carried a news story (March 27, 2009) which stated, “For years the conventional wisdom was that large diamonds were the most prized jewelry possessions. Yet attitudes to conspicuous consumption have changed in tandem with the downturn in the global diamond business during the worldwide recession. As a result, consumers’ decisions are more considered: a diamond the size of Manhattan now teeters on the edge of the distasteful, while investors want more for their money than simple stones devoid of design innovation.”
Sales of fine jewelry collections were also disappointing, with lower unit sales and a decline in the average ticket, particularly in the Americas.
Engagement jewelry sales were down less than average; bridal is a relatively stable category. Contrary to some media reports, the number of weddings does not decline in recessionary periods.
Silver and gold jewelry also posted a smaller sales decline than the company average. Management said sales of charm jewelry were strong. Tiffany has introduced a new collection called Tiffany Keys, a collection of pendants in a wide range that spans platinum and diamond, gold, and silver.
Watch sales were soft for Tiffany in the fourth quarter. However, the company is touting its new relationship with the Swatch Group which will result in new designs and expanded distribution during 2009.
As a result of the recessionary environment as well as reviewing its total financial outlook, management highlighted the changes it has made in its operations in recent months.
It closed its diamond facility in Yellowknife Canada due to its high cost and lack of new rough diamond supply opportunities in Canada.
It offered early retirement to 800 employees, of whom 600 elected to participate.
The Iridesse pearl division is being phased out.
Selective staff reductions have been completed.
Its investment in a diamond mining company has been written down.
Its new store opening program has been trimmed for 2009. After opening 22 stores in 2008, about 13 units are planned in 2009. In the U.S., three new stores are planned. An additional store is planned in Toronto as well as Mexico. Outside the U.S., a new store is slated to open in Europe, and seven units are scheduled to open in the Asia-Pacific region including China.
Tiffany’s capital expenditures will likely be about $100 million this year or just under 4 percent of projected sales, down considerably from its normal 6 percent to 7 percent of sales.
It has suspended the buyback of TIF shares to conserve cash.
Management’s outlook for this year (fiscal year ending January 2010) is as follows:
Global sales are expected to decline by about 11 percent to $2.6 billion. This is in the range of the IDEX Online Research sales forecast.
Sales in the Americas – mostly the U.S. – are expected to decline by a mid-teen percentage. Sales declines will be larger in the first half than the second half of the year.
Online and catalog sales are expected to decline by a high single-digit percentage.
In global markets, the company is looking for a 10 percent sales decline in local currency in the Asia-Pacific region, including Japan. In Europe, sales in local currency are expected to be about flat. Wholesale sales of diamonds are expected to be down by about 20 percent for Tiffany. We note that these numbers do not coincide with the numbers that Tiffany reported in its press release. Because of legal regulations, the company must report its estimated sales in dollars; thus, management must guess at demand levels by market and potential currency swings. Even professional financial managers have difficulty guessing currency swings. With Tiffany’s management guidance, we have taken out the forecasted currency swings, and shown forecasts in local currency by market.
Profits will be under pressure.
Tiffany is approaching the recessionary environment like any good merchant: as competitors close their doors, it means more market share for Tiffany. Further, since the jewelry business is relatively capital intense, and since capital is scarce, there are likely to be few new entrants into the market.
The company plans a continuing program of new jewelry and collections in order to provide something new for its loyal customer base.
31 March 2009
Ten Things To Buy Before The Economy Improves
Sadly, someday this recession is going to end.
After 17 months of steep decline, both the presidents Council of Economic Advisors and the Federal Reserve now believe the economy will begin to recover sometime in 2009.
Yahoo! BuzzGreat news, to be sure. But its also a warning to consumers: The deals youre seeing on everything from houses and cars to televisions and furniture wont last forever. Luckily, for a host of goods and services, the sale of the century (literally) is still on.
In Pictures: 10 Things To Buy Before The Economy Improves
The reason is simple: no buyers. Personal savings in 2008 were nearly six times greater than in 2005, amounting to $191 billion or 1.8% of the nations disposable income. In 2009, annualized savings for January and February exceeded $450 billion, or more than 4% of disposable income.
For those feeling bold enough to bargain shop, opportunities abound. Some deals, like housing and automobiles, might be obvious, but others, like diamonds, might not be.
1 April 2009
Economic slowdown not affecting wedding spending, report says
A survey by Modern Bride magazine found that couples planning to wed are not scaling back on their wedding budgets despite the financial slowdown, but are moving their expenses to other items such as the honeymoon, photography and the engagement ring.
The study also found that 90 percent of brides reported they were either sticking to their original budget or planning to increase their spending.
The magazine study found that 86 percent of the brides-to-be were spending the same amount on jewelry as six months ago or even more.
31 March 2009
Leviev Observes a Jump in Demand for Rough Diamonds During March
RAPAPORT... Demand for rough diamonds is on the increase following months of depressed sales at the mines. Diamond mogul Lev Leviev told journalists in Tel Aviv Monday that demand for rough diamonds in March rose 50 percent compared with February, TheMarker reported. He added that rough prices grew 10 percent during the month.
Demand for rough fell dramatically when the economic crisis hit in the third quarter of 2008, as diamantaires cut back their purchases because of the fall in sales of the polished end-product and the lack of available credit to finance their inventory purchases. Leviev said that the depressed market was a result of the banks tightening their lending to the industry, which influenced prices to fall and the mining houses, including majors De Beers and ALROSA, to cut down on production.
Leviev’s comments support earlier industry reports of a more positive mood at rough tenders in March, which brought higher winning bids than in previous months. Reports from the major diamond centers — Antwerp, Tel Aviv and Mumbai — indicated a rise in business activity in March as polished prices stabilized. Diamantaires were reportedly looking to buy rough again. The true litmus test will come at the Diamond Trading Company (DTC) March/April sight, which is underway this week. The estimated values of the past three DTC sights have averaged around $100 million, about one-fifth the value of those a year ago.
Leviev’s LLD Diamonds saw its exports from Israel drop 20 percent in 2008, but it was still the country’s top diamond exporter. The company owns a polishing factory in Namibia, which scaled back operations earlier in March, dismissing 77 out of approximately 107 workers at the facility. Leviev also operates a luxury jewelry retail business. Leviev’s property holding company Africa Israel on Monday reported a net loss of $638.4 million (NIS 2.7 billion) for the fourth quarter of 2008, compared with profits of $66 million (NIS 278 million) a year earlier.
31 March 2009
Diamond May Get $8.5 Million at Sotheby’s
March 31 (Bloomberg) -- Petra Diamonds Ltd., a miner of the gems in Africa, plans to sell its first cut and polished stone at Sotheby’s in an auction that it estimates will fetch as much as $8.5 million.
The 7.03-carat blue diamond was cut from a 26.58-carat rough stone found at its Cullinan mine in South Africa, St. Helier, Jersey-based Petra said today in a statement. A carat equals 0.2 gram. The gem will be exhibited in Hong Kong, Paris, New York and London before being auctioned in Geneva on May 12.
“This stone certainly ranks among the most important blue diamonds that I have had the privilege of offering for sale,” David Bennett, head of jewelry for Europe, the Middle East and international at Sotheby’s, said in a separate statement today.
Petra, which previously sold rough diamonds for other companies to cut and polish, is getting involved in marketing and selling as industry demand plunges because of the world economic slump. De Beers, the world’s largest producer, has closed mines. Miner and retailer Harry Winston Diamond Corp. said yesterday it plans shutdowns at the Diavik mine in Canada.
“Rough-diamond prices currently aren’t that good, so we decided to go this route and ensure the stone gets maximum exposure,” Petra Chief Executive Officer Johan Dippenaar said in a telephone interview. “Sotheby’s is known to sell rare items, be it art or a stone like this.”
Polished diamond prices have dropped 15 percent in the past six months, according to an index from PolishedPrices.com.
Sotheby’s sold a vivid blue emerald diamond in October 2007 for a then-record $1.32 million per carat. The 6.04-carat stone fetched $7.9 million in Hong Kong, the company said. It has since sold two further pear-shaped blue diamonds for $4.9 million and $4.7 million.
Petra sold a 39.19-carat rough blue diamond from Cullinan for $8.8 million in October. The world’s most expensive blue diamond is the 17th century Blue Wittelsbach Diamond, which fetched $24.3 million at Christie’s in December, according to the International Colored Gemstone Association’s web site.
Petra dropped 0.25 penny, or 1 percent, to close at 24.75 pence in London trading. The shares have slumped 69 percent this year, the second-biggest decline in the 135-company FTSE AIM Basic Resources Index, which has gained 24 percent.
30 March 2009
Malaysian Designer to Debut $30 Million Diamond Dress
Malaysian designer Faisol Abdullah is creating the worlds most expensive dress decorated with 751 diamonds from Middle Eastern jeweler Mouawad. The $30 million frock tops Chris Aires $20 million diamond dress (above) created last year and ties the $30 million diamond bikini in terms of the worlds most expensive item of clothing. Abdullah plans to debut the silk and taffeta evening gown, which features a central 70 carat pear-shaped diamond and is dubbed the "Nightingale of Kuala Lumpur," in time for next months STYLO Fashion festival in the Malaysian capital. Mouawad, which produces Heidi Klums jewelry line, is a red carpet favorite of Nicole Kidman, Angelina Jolie, Jennifer Lopez and Britney Spears.
"Stocks drop, gold is even falling but a diamond is forever," Abdullah tells Reuters. "This is a dress with diamonds. Why go backwards, why cant we go forwards? We are going to the fantastic, but its real. You are getting value for money with these diamonds." "Its a security and insurance nightmare buts its worth it," adds Antoine Bakhache, head of Mouawads Asia operations. "Its not throwing $30 million right down the drain, it is an investment for the super-rich." Nancy Yeoh, chief executive of STYLO which commissioned the dress, says they plan to present the garment to royal courts around the world starting with the Middle East, noting, "Its art and there are still enough rich people who would want to buy."
26 March 2009
Tiffany expands Internet marketing with Facebook page
NEW YORK, USA, 25 March 2009 – In a new marketing step for the jewelry industry, Tiffany and Co. has decided to enter the sphere of social networking with a page on the Facebook social networking website. The page aims to create contact with fine jewelry lovers across the globe.
The page was created last month, and has already received 124,000 visits from surfers interested in viewing Tiffany jewelry designs and are providing feedback.
The page provides links to Tiffanys environmental awareness campaign and provides a platform for surfers to discuss issues with the jewelry retailer.
26 March 2009
Harry Winston soars after Kinross announces investment
NEW YORK, USA, 25 March 2009 – Shares of miner and jewelry retailer Harry Winston Diamond Corp, which have slumped in the last year, jumped after it announced it had received a $150 million investment from Kinross Gold Corp.
Kinross will acquire a minority 22.5 percent interest in the partnership that holds Harry Winstons 40 percent interest in the Diavik diamond mine in Canadas Northwest Territories for $104.4 million. The other 60 percent of Diavik is owned by Rio Tinto.
The other $45.6 million will buy an almost 20 percent stake in Harry Winston Diamond Corp with 15.2 million shares at $3 each.
"We are acting on a rare opportunity to acquire a stake in one of the worlds great diamond mines, operating in northern Canada," said Kinross CEO Tye Burt. "We view diamond mining as complementary to our core business of gold mining."
24 March 2009
Christie’s Places 30ct D/IF Diamond on the Block
While the large and exceptional diamonds were the gems that suffered the worst price tumble in the current financial crisis, Christie’s still has a strong belief in their viability. The auction house is offering a number of high-end diamond items, some estimated at about $1 million.
Christie’s Jewels Sale in New York on April 22 will offer diamonds, colored gems, and signed jewels including Antique, Belle Époque, Art Nouveau, Retro and Contemporary creations. Five jewels created by JAR are leading highlights in the sale.
Leading the diamonds in the sale is a pear-shaped diamond ring of 30.02 carats, D color and internally flawless clarity, set with an intense pink diamond band. Christie’s did not publish an estimate for this item, saying it will provide one on request.
Other highlights include a rectangular-cut diamond ring of 32.72 carats, D color and VS1 clarity estimated at $1.4 - 1.8 million, and a pear-shaped diamond pendant of 15.05 carats by Harry Winston, D color and VVS2 clarity, with an estimated sale price of $700,000 - $1 million.
Among the colored diamonds in the sale is a fancy grayish yellowish green "chameleon" briolette-cut diamond pendant necklace of 19.13 carats estimated at $800,000 - $1.2 million. The color of this diamond changes temporarily when gently heated, or when left in the darkness for a period of time and is therefore referred to as a “chameleon” diamond – this is the largest briolette-cut chameleon diamond in the world to be offered at auction.
The sale includes signed and vintage jewels, featuring an impressive antique ivory and multi-gem elephant, circa 1900, which is carved from a single piece of ivory.
“This exotic elephant is a rare relic of Indian refinement and a symbol of great power and prestige,” Christie’s writes in the auction catalogue. It has chrysoberyl bejeweled eyes, pearl tassels and golden toenails. The purple velvet carrying case is befitting of those made for orders originating on the Indian subcontinent, so this showpiece was likely made for an important Indian family. The auction house valuators estimate the value of the elephant at $80,000 - $120,000.
24 March 2009
Tiffany Q4 Net Sales Declined 20% to $841.2 Million
(March 23, 09, 9:31 Edahn Golan)
Tiffany & Co. reported on Monday a decline in fourth quarter earnings. Worldwide net sales declined 19 percent and comparable store sales declined 23 percent. Sales declines of 29 percent in the Americas were the most significant contributing factor to the company’s sales decline.
Fourth quarter net sales declined 20 percent to $841.2 million. On a GAAP-reported basis, net earnings in the fourth quarter were $31.1 million compared with the prior years $127.4 million, a 75.6 percent drop.
Annually, net sales of $2.86 billion were 3 percent below the prior year. On a constant-exchange-rate basis, worldwide net sales and comparable store sales declined 4 percent and 9 percent. The full years net earnings were $220.0 million versus $323.5 million in the prior year.
“Tiffany has clearly not been immune from global economic turmoil in recent months and we are taking a cautious view to business conditions in 2009,” said Michael J. Kowalski, chairman and chief executive officer. “We have addressed our cost structure in order to maintain reasonably healthy levels of profitability and strong liquidity, and position Tiffany for future growth.”
The companys earnings included pre-tax charges of $7.5 million due to inventory and other charges related to the closing of the IRIDESSE operations
In the fourth quarter, Tiffany offered an early-retirement package to approximately 800 U.S. employees and approximately 600 accepted the offer. Combined with additional staff reductions that were made and the anticipated closing of IRIDESSE stores, management expects to incur a reduction of 10 percent of worldwide staffing. This is expected to generate approximately $60 million of pre-tax savings in 2009, to be realized in selling, general and administrative expenses and in cost of sales.
In the Americas, fourth quarter sales of $458.9 million were 29 percent below the prior year and full year sales of $1.59 billion were 10 percent below the prior year. Comparable U.S. store sales declined 33 percent in the fourth quarter and 16 percent in the year. This included New York flagship store sales declines of 34 percent in the quarter and 9 percent in 2008.
“We have not yet seen signs of an upturn in our business with worldwide sales in the quarter-to-date declining more than 20 percent, which is in-line with our expectation,” Kowalski said in his 2009 Outlook.
“Our planning is based on the assumption that economic conditions will remain challenging throughout the year.” The company expects a worldwide sales decline of approximately 11 percent in 2009 and sales declines in the mid-teens percentage in the Americas.
23 March 2009
Alrosa Acting to Form Investment Diamond Market
Russian diamond monopoly Alrosa is a step closer to forming a market for investing in diamonds, after it has signed an agreement with asset management company Leader to create an infrastructure for trading in such diamonds.
The agreement, signed Thursday March 19 by Alrosa President Sergei Vybornov and Leaders CEO Anatoly Gavrilenko, calls for the formation of an investment center that will also provide banking services, diamond backed loans, diamond evaluation and certification services as well as risk insurance.
According to Interfax, specialized stock market tools, which include the option to buy shares in mutual funds backed by investment-graded diamonds, may also be instituted.
“Its an attempt to create a new class of investor, who will put money into a new product, the base for which will be Alrosas diamond stocks,” the Russian news agency Interfax quoted Vybornov.
According to Vybornov, the companies expect a $500 million diamond investment market to emerge in the short term, while cautioning that there are regulatory problems that wont be quickly resolved.
Gavrilenko said his company has asked the Federal Financial Markets Service (FFMS) to adjust regulations to allow the formation of such a market place, adding that initially small closed funds could be set up with a limited number of investors.
Alrosa is reportedly overhauling its sales system, forming three individual divisions: sorting, customer relations, and marketing and sales. The company said this would be done “in order to eliminate conflict of interests which arise when one division is responsible for all three functions.”
20 March 2009
GIA to Debut Mini Jewelry Career Fair
The Gemological Institute of America (GIA) will debut a “GIA ‘Mini’ Jewelry Career Fair” in Las Vegas on May 31 during the JCK Show.
The fair, sponsored by JCK Events, will be a condensed version of the Institute’s popular career coaching and job search events that have helped place job candidates in the jewelry industry for the last 18 years.
The career fair will focus on how to thrive in a challenging economy. It will include a “Working to Win” panel featuring some of the industry’s top executives and career coaching sessions with business leaders providing advice in various subject areas.
Although there will be no on-site recruiting, GIA will provide information on the career opportunities being offered by show exhibitors and buyers.
20 March 2009
Scholarships for Children of Jobless Indian Diamond Workers
India’s Gem & Jewellery National Relief Foundation donated Rs. 18 million ($357,210) to help educate 36,000 children of diamond industry workers in Gujarat. The funds will pay for tuition in the coming academic year and will be given directly to the schools.
The scholarships will pay for tuition for children in 1,309 schools across Gujarat. This includes 540 schools in Ahmedabad, 70 schools in Amreli, 167 schools in Bhavnagar, 80 schools in Navsari, 92 schools in Palanpur, 140 schools in Surat and 220 in Surendranagar.
Hundreds of thousands of people working in diamond manufacturing in India have lost their jobs as a result of closures and scale backs in the industry.
“The industry has voluntarily come forward in a bid to alleviate the suffering of those affected, and wants to save the school year of their children. We further wish to work towards a subsidized food distribution program, and would like the State Government to help us implement this.”
“Diamond workers are nurtured and cultivated by the industry over decades. They help the industry maintain its leadership position in the world markets. It is essential to continue with relief measures over the next six months,” he added.
17 March 2009
DMCC Consolidates Diamond, Pearl and Gems Under One Management
The Dubai Multi Commodities Centre (DMCC) decided to consolidate its diamond, pearl and colored exchanges into a single unit, the Precious Gems Division. Coloured Stones & Pearls Executive Director Gaiti Rabbani has been appointed executive director of the division as well as chief executive officer of diamond exchange.
The DMCC decided on the move to achieve greater working synergies and pursue strategic growth opportunities, Rabbani told IDEX Online.
The new division will include the activities of the DMCC’s Diamonds Division, Coloured Stones & Pearls Division, Dubai Diamond Exchange (DDE), Dubai Pearl Exchange (DPE) and Dubai Gems Club.
The DMCC has also created a Diamond Control Office (DCO). Its role is to regulate and oversee the trade of diamonds and the implementation of the Kimberley Process Certification Scheme. Maryam Al Hashemi, who has been heading the Kimberley Process operations at DMCC since 2003, will head the DCO.
According to Rabbani, Peter Meeus, who until recently served as executive director for diamonds, has been appointed chairman of the board of directors of the Dubai Diamond Exchange (DDE). He will continue in his role as chief executive officer of the International Diamond Lab, the Dubai headquartered diamond grading lab. Meeus has been given the mandate to lead certain special projects at the DDE.
“All of the initiatives will continue as before,” reassured Rabbani adding that personnel cuts are not planned following the consolidation.
Among the initiatives are regular rough diamond and pearl tenders. In addition, polished diamond tenders are in the planning.
Rabbani held a string of management roles with the DMMC, including business development manager.
“This consolidation of our precious gems operations is a natural step in DMCC’s evolution,” said DMCC Executive Chairman Ahmed Bin Sulayem. “Many of our member companies trade across the spectrum of precious gems, and through our new integrated division, we can offer more synergized and personalized services. We are confident that the integrated team will further strengthen the services provided by DMCC.”
16 March 2009
De Beers JV mine in Namibia may close from April
JOHANNESBURG, March 16 (Reuters) - De Beers, the worlds top producer of rough diamonds, said on Monday its Namibia joint venture, Namdeb, was considering closing its mines in that country from April 1 for three months due to weak sales.
De Beers -- 45 percent held by Anglo American Plc (AAL.L) -- has said it would cope with the hard times brought on by the global financial crisis by significantly reducing output levels, costs, including jobs, and capital expenditure at its mines.
De Beers said in February total sales for 2008 rose 1 percent to $6.9 billion.
Last month, De Beers joint venture in Botswana, Debswana Diamond Co., also temporarily shut its mines, and De Beers is in talks with unions in South Africa to cut some 1,000 jobs.
Namdeb, owned 50-50 by Namibias government and De Beers, was in talks with unions and other parties over the closures.
"Namdeb has put this proposal (forward) and is in discussion with unions and other parties. It is likely that if the proposal is accepted it will take effect from April 1," a spokesman for De Beers in Johannesburg told Reuters.
"For now Namdebs mining operations continue. The mines are definitely not shut, they may be planning to do that but it may take a few weeks to implement something like that."
"Production will be halted for three months by the company in order to cut costs," she said.
"The workers will be paid as normal. We have informed the minister for mines and energy and there will be a one month notice (before the closure)."
Namdeb would not lay off workers because some workers had opted to reitre early or take retirement packages, she said.
Essential services of health, safety, environment and education nature would continue, as would maintanance work.
Three of De Beers shareholders, including Anglo, said last month they had agreed to loan the company $500 million to help it weather the economic downturn, following muted sales in 2008.
Analysts have said the performance of De Beers, which controls around 40 percent of the rough diamond market, might worsen this year as the global economic crisis hits demand.
Debswana Diamond Co., the worlds biggest diamond producing company by value, shut down all its mines until at least April 14. The Damtshaa mine and Orapa No. 2 plants will be shut for the rest of the year, Gaborone-based Debswana said.
Moodys on Thursday cut the outlook for Botswanas foreign currency rating to stable from positive citing a possible lengthy downturn in demand for diamonds, the countrys main source of budget and export revenue.
16 March 2009
Chocolate cake decorated with diamonds, gold leaves
Businessman Angelito Araneta Jr., 21, shows a chocolate cake topped with 15 African diamonds and covered with 24-karat gold leaves, which he displayed at his residence in Manila March 16, 2009. Araneta, who commissioned his catering service to create the cake, says he plans to sell the cake at 124,000 pesos (2,558 U.S. dollars) to men for use as a marriage proposal gift.
16 March 2009
Diamonds and Divas debut on the net
Diamonds, gold and gorgeous fashion were all on display at last night’s glittering gala celebrating the Metropolitan Opera’s 125th anniversary.
The Opera (with a capital “O”) is NOT the place for the pants suit, and I’m happy to report nary a one could be found as stars like Brooke Sheilds, Patricia Clarkson and Juliana Marguiles lit up the runway with tasteful diamond looks and gowns galore by the evenings sponsor, Yves Saint Laurent.
Big Love’s Gennifer Goodwin looked lovely in a YSL printed dress with black diamond earrings and metallic cuffs, and supermodel Claudia Schiffer opted for a similar statement on the wrist with a series of silver bangles to go with her basic black.
Other red carpet highlights included Kanye West’s main squeeze, Amber Rose, in icy diamond studs, Becki Newton and Diane Kruger keeping the bling to a minimum with gorgeous strapless gowns – both by YSL – and Zoe Saldana in verdant green with diamond drop earrings.
Fashion misses included Parker Posey in a burgundy bolero and layered gold chains, Emily Mortimer in an unflattering maroon sequined YSL number with minimal bling, and Mary Kate Olsen, whose right hand rings and black kimono dress would have worked better without the Elvira make up and bed-head hair.
Not to be missed, however, were the amazing gala performances, which included a tribute to Placido Domingo and a star-studded sampling from The Met’s upcoming season. Clocking in at over three hours, the jam-packed program perhaps gave the crowd a reason to root for the ‘fat lady’ to sing. But regardless of the singers’ stamina, a diamond-filled, pants suit-less night at the opera is a glowing success in my book.
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