Once again, Sterling Jewelers took market share in the U.S. Posting sales that steamrolled over all of its major competition, Sterling’s total sales rose by a robust 12.5 percent (constant dollars) in the quarter ended October 2006, well ahead of industry sales growth estimated at just under 10 percent.

 

Sterling has geared up for a strong holiday selling season. Like other jewelers, it will rely heavily on television advertising to entice people to buy jewelry. Once customers are in its stores, sales associates will take over and are prepared to raise the conversion ratio – browser-to-buyer – for Kay, the regional brands, and Jared.

 

Highlights from Signet’s October quarter and year-to-date include the following: 

 

• Total sales in the U.S. reached about $431 million, up 12.6 percent from last year, on a constant dollar basis. Same-store sales were up 6.5 percent, with Kay’s performance particularly strong.

• For the year-to-date, the average ticket is up about 6 percent at Sterling Jewelers.

• Bad debt was 2.9 percent of U.S. sales, down from 3.2 percent last year in the October quarter. Credit sales as a percentage of total sales were roughly flat year-over-year. While Sterling uses credit as a marketing tool, it has not overly loosened credit, as attested by a decline in bad debt levels. The table below illustrates the growth of credit sales at Sterling as well as the long term decline in bad debt as a percentage of credit sales.

Source: company reports

• Sterling continues to roll out new stores. So far, 54 new stores have been opened, and 63 refurbishments and relocations have been completed. Sterling expects to close 20 stores for the year ending January 2007. The company has also opened 21 off-mall locations and four outlet centers this year. By the end of the year, 24 new Jared superstores will have opened this year, bringing the total Jared units to 134, or the equivalent of about 550 mall stores, in terms of aggregate revenues. The table below illustrates Sterling’s superior growth versus its competition.

Source: company reports

• Holiday marketing and advertising will be aggressive, and includes the following:

• Television impressions will increase for Kay, with marketing expenditures roughly flat with last year, as a percentage of revenues. The company will continue to utilize the highly recognizable catch-phrase, “Every Kiss Begins With Kay.

• In addition to television, Kay will use national radio, newspapers, and direct-mail advertising.

• For the first time, Kay will have e-commerce capability during the 2006 holiday selling season.

• J.B. Robinson’s television advertising test has been expanded to three additional cities. The regional brands in other markets will continue to be supported by local radio commercials.

• Jared will use national cable television for the first time. In addition, Sterling will promote Jared with local network television and radio advertising.

• A number of merchandising programs are planned for the holiday selling season, including Journey diamond jewelry, the right-hand ring, and circle jewelry collections. The Leo Diamond collection continues to expand. Le Vian, a prestigious 500-year-old fashion jewelry brand is now being sold in all Kay stores. In Jared, the Peerless Diamond, a branded Ideal Cut diamond exclusive to the group, has been rolled out to all locations. Finally, Jared continues to strengthen its position as a purveyor of luxury watches.

• Management noted that, while its Kay and Jared brands are posting solid sales gains, its regional brands are lagging. Management attributes some of this lag on the lack of advertising impressions. Even though advertising as a percentage of sales is roughly equal for all of Sterling’s store brands, Kay’s advertising is more efficient and effective because of its mass and ability to buy nationally. Management is testing new television for its regional brands; if it is successful, it could provide a boost to its regional brands.