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David Brown

Sales Rebound Continues, Gold Joins the Rally

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The rebound in jewelry-store performance that we have seen in recent months continued into June with an improvement on rolling 12-month sales of 1.16 percent for the month. This equates to an annualized increase if it were to continue of just under 14 percent for the year.

Average annual sales for the 12 months across all the stores in our survey group now sits at just over $1.4 million. June’s average result of $107,130 is up on the June 2013 figure of $91,001 by 17 percent. Total items sold at 348 per store was up from the June 2013 average of 324 and there was a slight increase in the average retail value sold (including repairs) from $258 to $266.

One disappointing figure, however, was margin on sales with an average margin for June 2013 of 49 percent dropping to just 46 percent in June 2014, one of the lowest margin performances we have seen to date. Margin for smaller stores appears to be much more healthy at 53 percent while larger stores are contributing to the big decline with an average margin achieved of just 45 percent. With diamond sales of over four times the level of smaller stores (those under $1 million) and an average retail sale price in diamonds that is almost 60 percent better, it seems the discounting of big diamond sales by the larger stores is the key factor pulling this margin down.

Gold appears to be enjoying a resurgence in popularity across stores. Sales in units had been in a steady decline for quite some time but as the graph shows this has now rebounded sharply in recent months.

The rebound has been rather sudden and comes as something of a suprise. There seems no obvious reason for this rapid increase in popularity. We can only assume it’s a delayed reaction to the slow decline in the price of gold over the last 2 years making it a more affordable option. Certainly the drag could relate to the time required for savings to pass through the retail stores of many jewelers. With many inventory items purchased at gold’s high and, given a stockturn of only one turn per year,most jewelers would have been reluctant to see the prices drop before they moved old jewelry on. Current sales may reflect a more reasonable “buy in“ price for most jewelers replenishing stocks. This will lead to better prices for customers and an increase in quantities sold.

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Not suprisingly the percentage contribution from gold to overall sales has seen a steep increase with sales inching their way back up towards the 9 percent of store sales mark. Also unsuprisingly is that monthly sales percentages are far higher and now resemble a heart monitor in their volatility. Clearly the monthly figures show that the movement in gold began earlier in 2013 when the price effect was first being felt and appears to confirm that the drop in the price of gold has been a contributing factor to this situation.

So what does this mean for your store? How are your gold sales trending compared to others?

If your sales have not shown any sign of resurgence it could be because you are carrying a lot of old product at now outdated (and inflated) prices. Now’s a good time to print a stocklist by age report and see how old your gold inventory is. If your product is predominantly over 12 months old you could be dealing with items that are no longer price competitive in the current market.

Sadly there is no simple way to deal with this. You may have to bite the bullet and reduce your prices to move them on. The good news is any restocking will now be at a lower price but the trick, from a cashflow viewpoint, will be to make sure you still have sufficient funds to replenish that inventory. Taking a paper loss on an item is one thing … not having enough money to repurchase can be another. Take some advice from Warren Buffett. He never minds a drop in prices; his attitude is that he’s never a seller and always a buyer so any day there is a discount is a good day to him! You may well be in the market of selling but it’s a more even playing field when prices are down and overall lower prices for buying and selling are still a better situation for customers and ultimately you.


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