BLBG : Jewelers Face ‘Difficult’ Time Recouping Gold Cost
Gold jewelers, the biggest users of the precious metal, will have a “very difficult” time recouping higher metal costs during year-end holiday sales, according to Gerald Ratner, former chief executive officer of Signet Jewelers Ltd., the world’s largest jewelry-store owner.
Gold jumped 19 percent in dollar terms in the past year and since prices went over $1,000 an ounce last month “sales haven’t been great,” said Ratner, who runs Oxford, England- based Gerald Online, an Internet retailer that is part of SB&T International Ltd. of Mumbai. Jewelry sales dropped 22 percent in the second quarter, according to the World Gold Council.
“We tried raising prices in the spring and we suffered, our sales went into reverse,” Ratner said by phone from Oxford yesterday. “We’ve had to go back and reduce prices.”
Gold for immediate delivery rose $5.86, or 0.6 percent, to $1,023.16 an ounce by 10:51 a.m. in London. Gold traded in pounds, the price Gerald Online pays, jumped 29 percent in the past year.
Gerald Online cut prices of gold and other jewelry by 40 percent, effective Oct. 1, Ratner said.
“What we’re trying to do is gain market share in a shrinking market,” he said.
“If you’re at the top end of the market, whatever you do you’re going to suffer this Christmas, because of the recession,” Ratner, 59, said. Below that, “I would think it’s going to be very difficult to pass on the increased costs.”
Price Cut
After the price cut, Gerald Online will get 170 pounds ($271) for every 100 pounds of merchandise the company buys, down from a previous margin of about double, Ratner said.
“The jewelry market has always been really quite high margin, and that is now perhaps not the case,” he said. “I personally don’t think it will ever go back to high margins.”
Sales at Signet fell 19 percent in last year’s fourth quarter as shoppers cut back on luxury items amid the U.S. and U.K. recessions. Sales at Tiffany & Co. fell 21 percent during the worst holiday shopping season in four decades.
“In the jewelry business, Christmas is the most important time, more so than in other areas of the retail sector,” Ratner said. When Gerald Online didn’t lower prices for year-end holidays last year, sales fell about 10 percent, he said.
Ratner was CEO of the U.K. jewelry retailer now known as Signet Jewelers from 1984 to 1992. He got back into jewelry in 2003 with the formation of Gerald Online.
