Second-Half Projections Look Good

July 2, 2002

Second-Half Projections Look Good

The second half of 2002 will be positive for the jewelry industry, predicts Ken Gassman, director of research at the Diamond Research & Marketing Institute, a subsidiary of Rapaport Group . Writing in the Rapaport Report's July issue, Gassman says diamond and jewelry sales should rise by at least 4-6% in the second half of 2002, if there is no substantial change in jewelry demand trends and U.S. gross domestic product rates. The analyst says industry productivity gains and expense reductions over the last 18 months mean profits should be up too.

Gassman derives part of his optimism from above-expectation first-half results in the jewelry industry, which included solid Mother's Day sales gains. He also says most jewelry chains are planning for Christmas sales gains of 5-6%. Extra advertising and promotion, fueled by the Diamond Trading Co.'s Supplier of Choice strategy will help sales, says Gassman, as will strong promotions by the World Gold Council and the Platinum Guild.

The analyst says jewelry sales are a leading indicator – jewelers' results began weakening in late 2000, well before the U.S. recession began in March 2001 – now the industry is posting positive results even as most key economic indicators remain in a recessionary phase.

Gassman says variables that could affect his forecast are rising gold prices and higher rough diamond prices which could put pressure on retailers' margins. Gold is up more than 20% from its lows in 2001 and DTC just implemented a 3-4% increase in rough diamond prices. Jewelers could reprice their gold merchandise, he says, but some may choose not to do so since gold jewelry often has above-average margins. Higher diamond prices at retail will probably not be needed until sometime in 2003, due to the extended period diamonds spend in the trading pipeline.

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