Industry Analysis: Holiday Sales Off to a Strong Start

We publish courtesy of Gems & Gemology GIA Insider

Author: Russell Shor, Senior Industry Analyst

 

This 27.19 ct D-IF dimaond sold for $3.66 million at Sotheby's Dec. 9 Magnificent Jewels auction in New York. Photo courtesy Sotheby's.

 

 

 

This GIA-graded Fancy Intense pink diamond brokle two records: the most ever paid for a gemstone at auction and the highest price per carat ($1.86 million). Photo courtesy Sotheby's

 

 

 

 

The biggest development of this final month of 2010 is the spate of good news. Top jewelry auctions continue to break price records around the world, while the U.S. holiday shopping season indicates that jewelry is high on the buying list for everyday consumers.
One retail analyst group, IBIS World Inc., estimates that jewelry demand will rise 6% over the 2009 season. Earlier in the year, analysts were forecasting increases of around 2-3%, based largely on predictions of increased spending among the wealthiest buyers. Retail jewelers report, however, that sales have risen higher than expected across the board since mid-November.
Press reports and anecdotal evidence indicate that both the volume of sales and the average ticket price will be up significantly over the same period last year, even adjusting for gold price inflation, as consumers feel more comfortable spending. The Centurion newsletter survey reported that some 60% of luxury jewelers have posted double-digit sales increases thus far, while an additional 14.8% were up between 6% and 10%. Tiffany & Co. and Blue Nile have had seasonal gains of 10% and 12%, respectively.
Independent retailers are also optimistic about the season. Traditionally, as much as one-third of their holiday sales take place during the final 10 days before Christmas.
One reason for the better-than-expected retail sales is that most economists are no longer warning about a “double dip” recession. The consensus is that while a struggling job market will remain a drag on recovery, the economy will continue a slow growth through 2011. In addition, U.S. corporate profits have been quite strong the past two quarters, which suggests that those who have jobs may no longer fear losing them or being subjected to cuts in wages and hours.
In Europe, the fiscal troubles of Ireland and possibly Spain have unsettled the European Union. But while the European recovery remains slower, there is no talk of these problems pushing the world back into recession, as was the case last summer when Greece’s problems came to light.
The ultra-wealthy continue to flock to very large colorless and top fancy-color diamonds and extremely fine-colored stones. The Nov. 16 Sotheby’s auction in Geneva was a record-breaker on a number of fronts. It was the first $100 million-plus jewelry auction ever. Nearly half of that total, $46.1 million, went to a 24.78 ct GIA-graded Fancy Intense pink diamond that broke two records: the most ever paid for a gemstone at auction and the highest price per carat ($1.86 million).
The following day, at Christie’s Geneva, two Colombian emeralds sold for extremely high prices: A 25.83 ct octagon-shaped stone went for $1.04 million, while a 9.27 ct Muzo stone drew a winning bid of $824,720.
Sotheby’s Dec. 9 Magnificent Jewels auction in New York broke a sales record for that venue: $53.2 million, with 10 lots selling for more than $1 million. The top lot was a 27.19 ct D-IF diamond that sold for $3.66 million, or nearly $135,000 per carat.
Meanwhile, preliminary reports from the Dec. 13-17 Diamond Trading Company sight put it at about $450-$475 million. Diamond manufacturers hope the encouraging U.S. holiday season, coupled with continued strong demand from India and China, will break the impasse over polished prices that has lasted for six months.
Rough prices have increased far ahead of polished, as cautious retailers and jewelry manufacturers still refuse to pay higher rates. A number of manufacturers, particularly in India, stopped polishing certain sizes, preferring to hold them until prices improve, instead selling from inventory or stones sourced from the secondary market.
Russell Shor
Senior Industry Analyst

 

 

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