Investors Hesitant to Buy Jewelry Store Stocks

March 22, 1999

Investors Hesitant to Buy Jewelry Store Stocks

Despite outstanding profits among publicly traded retail jewelry chains, the companies' stocks sell for prices well below market average, reports Reuters News Service.

Companies such as Zale Corp. and Whitehall Jewellers, which trade respectively at 17 times and 12 times their trailing earnings, don't measure up to retailers such as the Gap and and Home Depot Inc., which maintain price-to-earning ratios of 40 to 60. Tiffany is the only company that comes close to that average, Reuters says; the rest (Signet Group PLC's Kay Jewelers, Whitehall, Jan Bell Marketing Inc. and Finlay Enterprises Inc.) continue to trade low despite their steady growth in profits.

Analysts say investors fear that a downturn in the economy will greatly effect jewelry stores, a worry jogged by the memory of Zale's bankruptcy in the late '80s and early '90s. However, the industry landscape is different this time, analysts say. Jewelry stores are managed differently, increasing sales outside the holiday period and better controlling inventory, and there are fewer chains. The increasing demand for fine jewelry by Baby Boomer consumers also promotes a healthy outlook.

- by Stacey King