April 8, 2005
Kay Jewelers Now Largest in U.S. by Sales
Signet Group says Kay Jewelers, its nationwide U.S. jewelry store chain, became the largest specialty retail jewelry brand by sales in the nation during the fiscal year that ended for Signet Jan. 29.
Kay, with a turnover of $1,155.5 million, has seen its number of stores increase by almost 200 in the past five years. Kay stores now total 742 around the U.S. and Signet plans to increase the chain's presence in malls by between 20 and 30 stores in the 2005-2006 fiscal year. In addition to mall locations, stores under the Kay brand are also being opened in lifestyle centers and power strip malls. The chain added 10 such locations last year and plans another 10 openings for the 2005-2006 fiscal year.
Signet, the parent company of Sterling Jewelers in the U.S., announced its fiscal full year results on April 6. It had other statistics of note about its entire U.S. business, which also includes Jared The Galleria of Jewelry and other regional chains. The U.S. division increased its operating margin to 13.4% and its market share to 7.2% of the specialty sector. Same store sales were up 5.9% during the fiscal year, over last year. Besides Kay Jewelers, Jared, which is an off-mall destination concept, performed particularly well, said Terry Burman, group CEO, in his written review. In the past five years, Jared stores have more than tripled to 93 locations.
"Growth in new store space and further development of the division's competitive strengths in the critical areas of merchandising, store operations and marketing have contributed significantly to the outperformance of the business [compared to its competition] and remain key elements of future strategy," said Burman in his year-end review. "Given the continuing consolidation in the specialty jewelry sector, there should be opportunities to gain further market share both organically and, if appropriate, by acquisition. The U.S. division is now targeting organic space growth of 7% to 9% in future years [the previous goal was 6% to 8%]."
Burman's review further noted that the U.S. division had focused on superior customer service and product knowledge in 2004 as competitive advantages readily identified by its consumers. Each store now has at least one certified diamontologist and all sales staff were coached during 2004 using the "Ultimate Diamond Presentation" training course. Procedures for recruitment were strengthened and staff retention improved. Stores also introduced improved repair and special order services.
Mall stores enhanced their diamond selections at the upper end and expanded the branded Leo Diamond range, said Burman's review. The mall stores also worked in conjunction with the World Gold Council to reinvigorate fashion gold merchandise. Jared stores did well in loose diamonds and the Leo Diamond range, as well as in luxury watches such as Rolex, TAG Heuer and Raymond Weil. Cartier watches will be tested in certain Jared stores during the 2005-2006 fiscal year.
Average unit selling prices in both the mall stores and Jared increased by 10%, reflecting not only consumer movement to higher value merchandise, such as the Leo Diamond range, but also a change in retail prices implemented during the year, said Burman's review. The division's competitive advantage, obtained by sourcing loose stones for about 55% of diamond merchandise, helped offset higher rough diamond costs.
Burman also credited strong marketing programs to the U.S. division's success. Kay television advertising impressions were increased by 11% over the winter holiday period and Sterling also introduced national radio advertising. Sterling's annual gross marketing spend amounted to 6.6% of sales during the 2004-2005 fiscal year and its dollar marketing expediture has doubled over the past five years.
Burman's review also noted that Sterling now has 321 mall stores trading under strong regional brand names other than Kay Jewelers. "The regional stores could provide the potential to develop a second mall brand of sufficient size to justify the cost of national television advertising. This would require about 550 stores which could be achieved in the medium term by a mixture of store openings and acquisitions," said the review. Sterling plans to open 20 to 30 new stores under regional brand names during the current fiscal year.
by Peggy Jo Donahue