Charles & Colvard Q1 Net Sales Slide 41% to $3.4 Million

Charles & Colvard, the creator of moissanite, reported a first quarter net sales decrease of 41 percent to $3.4 million for the three months ended March 31. The company’s net loss totaled $689,000, compared to a net income of $330,000 in the comparable 2007 period.

Domestic sales were down 47 percent to $2.4 million, while international sales dropped 20 percent to $961,000, primarily due to decreased sales in the UK, Thailand and Canada and partially offset by higher sales to Hong Kong.

The company’s trade also decreased in terms of volume. Total shipments of 18,400 carats of moissanite for the period were a 48 percent decrease from the 35,300 shipped in the previous year period. Shipments to the U.S. were down 53 percent by volume, while international shipments dropped 28 percent.

Gross profit decreased 49 percent to $2.2 million, and gross profit margins decreased 66 percent, primarily a result of a write-off and increase of a reserve relating to consigned jewels being returned through K&G Creations, who is exiting the moissanite business.

The sales decline, the company noted, was mainly attributable to actions by retailer to effectively reduce inventory on-hand, partially due to the challenging macro environment. An additional negative factor was the time and effort necessary for several retailers to transition to new moissanite jewelry suppliers to replace the jewelry previously sourced through K&G Creations, an issue the company expects to be sorted in the second half of the year.

Charles & Colvard also noted that, as part of a cost-cutting initiative in April the company reduced its U.S. workforce by 18 percent, an action that is expected to result in annual savings of more than $500,000.

Bob Thomas, chairman and CEO commented, "While we were disappointed with our first quarter financial results as sales trends at retail continue to be soft, we remain intently focused on addressing short-term challenges our company is facing.

“We are pleased to announce that Kanter International, a brand consulting firm we engaged to conduct a review of our company, has completed its assessment of our business model and provided recommendations. We are in the process of evaluating the recommendations which focus on organizational structure, brand building and sales growth strategies as well as expense controls and inventory management.”