After surging in September, jewelry sales gains in October in the U.S. market returned to more normalized levels. For the month of October, specialty jewelers’ sales advanced by 5.8 percent, which is more or less in the range of “normalized” sales increases over the past twelve months.

 

Factors which helped drive solid jewelry demand in October included lower gasoline prices, solid wage gains, a strong labor market, and the prospects of large year-end bonus checks. In addition, price inflation of jewelry at the store level also helped drive sales higher in October.

The graph below compares U.S. jewelry sales gains to all retail categories (ex-automobiles).

 

Source: US Dept. of Commerce

 

September Jewelry Sales Gain Revised Upward

Last month, the U.S. Department of Commerce reported that preliminary jewelry sales were up just over 11 percent for the month of September. IDEX Online Research noted that this spike in jewelry sales gains was related to easy comparisons during September 2005 when the nation was reeling from the effects of several Gulf Coast hurricanes. This month, the Department of Commerce revised its September jewelry sales estimate to show a jump of 15.3 percent.

 

October Retail Sales Soft

The Department of Commerce reported that aggregate U.S. retail sales were generally soft in October. However, by category, retail sales performance was mixed in October. As expected, sales at gasoline stations fell; this was related to lower prices at the pump. Further, there were noteworthy declines in furniture and department store sales. Large gains were noted in drug and food stores.

 

Preliminary government figures for November show that retail sales surged, with consumer electronics demand particularly strong. Jewelry sales for November will be released in mid-January.

 

Luxury Goods Demand Remains Solid

Both jewelry and aggregate luxury demand retreated to more normalized levels in October, after surging in September due to easy comparisons last year. While jewelry demand has shown more volatility than demand for all categories of luxury goods, jewelry sales have been tracking slightly stronger than other luxury goods categories for most of 2006.

 

The graph below compares jewelry retail sales with retail sales of luxury goods.

Source: US Dept. of Commerce & ICSC

Mall Jewelry Sales Lag

For most of 2006, mall jewelers have been posting smaller gains than jewelers with off-mall stores. This trend has continued through the fall, as the graph below illustrates.

 

Source: US Dept. of Commerce & ICSC

 

Specialty Jewelers’ Sales Outpacing Other Jewelry Sales Outlets

With this report on U.S. jewelry retail sales, IDEX Online Research has introduced a new measure of jewelry sales. We are now able to compare specialty jewelers’ sales with all jewelry sales. In the U.S., there are about 128,000 doors selling jewelry, of which there are about 28,000 specialty jewelers. The balance of these 100,000 retailers represent non-specialty jewelers including mass merchants such as Sears and Kohl’s, discounters such as Wal-Mart, and all others who sell jewelry. Roughly 47 percent of all jewelry purchased (by value) in the U.S. is sold by specialty jewelers such as Kay and Zale; the other 53 percent is sold by other merchants.

 

For most of 2006, specialty jewelers’ jewelry sales gains have outpaced jewelry sales gains in alternative retail outlets. If this trend continues in the final quarter of the year, U.S. specialty jewelers might pick up market share. Historically, specialty jewelers have slowly been losing market share over the past decade or so.

 

Source: IDEX Online Research

 

Outlook for Retail Sales: Moderation

Despite solid retail sales gains in all categories during 2006, there are reasons for consumer spending to moderate. Weakness in the housing markets will take a toll on spending growth. Employment in housing-related industries is falling, reducing total employment growth and limiting growth in total wage income. Record debt burdens and little or no saving will also be formidable obstacles to spending growth.

 

On the other hand, declining energy prices, job gains (though at a slower pace), and large year-end bonus payments will help support consumer spending. While we believe sales growth will slow moderately, it will not collapse.

 

IDEX Online Research’s Proprietary Jewelry Sales Forecast Steady

For much of 2006, IDEX Online Research has been forecasting jewelry sales growth for specialty jewelers of about 6-7 percent. Concurrent with the September jewelry sales report, we raised our forecast to 8 percent. This month, we have reined in our sales forecast to a gain of about 7 percent for the full year. This simply reflects the more limited impact of the September sales gain.

 

Qualitatively, we think that this mathematical model may be too optimistic. However, between inflation and unusual events – the September sales surge – it remains quite likely that reported jewelry retail sales – measured in dollars through the cash register – will be up by around 7 percent in 2006. The only event which could alter this trend is a total collapse of consumer spending on jewelry in the all-important holiday selling season. So far, that does not look likely.

 

The graph below summarizes IDEX Online Research’s jewelry sales forecast for the U.S. market in 2006.

 

Source: IDEX Online Research