Charles & Colvard Q1 Net Sales Decreased 28%

Charles & Colvard’s (NASDAQ: CTHR) first quarter net sales decreased 28 percent to $5.8 million compared to $8 million in the first quarter of 2006. The company pinned the soft sales on decreased TV advertising, a lack of new distribution shipments and a decision by a retailer to reduce the number of outlets offering moissanite jewelry.

The moissanite maker’s gross profit decreased 25 percent to $4.4 million. Gross profit margins increased 76.7 percent, primarily as a result of improved production costs.

Net income for the first quarter decreased 78 percent to $339,000, compared to net income of $1.5 million in the first quarter of 2006.

According to President and CEO Bob Thomas, “The shortfall in expected revenue (…) was caused by the lack of new distribution shipments, a reduction of television broadcast hours in the U.S. dedicated to moissanite product sales, and the previously disclosed decision by Landau Stores to reduce the number of outlets offering moissanite jewelry.”

That, and high inventory levels, led the company to adjust annual revenue expectations. Fiscal 2007 net sales are now estimated between $45 and $48 million.

“In the second quarter, we have a strong opportunity to increase our presence at several prominent, national store chains. Kohl's is scheduled to add the moissanite category at 455 new outlets,” Thomas revealed. Sears is expected to broaden its test distribution into 121 additional locations.

Moissanite offerings on one of the UK’s home shopping television channels retailers and retail distribution in south Asia are expected to lead growth outside the U.S.

Shipments of 35,300 carats during the quarter were 25 percent lower than in the same period of 2006. Shipments of carats within the U.S. decreased 32 percent while internationally they increased 33 percent.