LVMH Q1 Watch and Jewelry Sales Up 28%

LVMH Moët Hennessy Louis Vuitton reported that sales for its Watches & Jewelry business rose 28 percent to 261 million euros ($371.2 million) for the first quarter of 2011 supported by the “excellent performance” of its own boutiques and its multi-brand retail stores as well as its recent watch introductions.

The company’s watch-making brands revealed their innovations at Baselworld, the world’s largest watch and jewelry trade fair. TAG Heuer strengthened its iconic Carrera collection of chronographs. Zenith, which performed well for the quarter, continued the renovation of its manufacturing facility in Le Locle, Switzerland. Hublot benefited from the strong momentum of its Big Bang and King Power lines and the opening of its own boutiques, most notably Place Vendôme. Chaumet's new Bee My Love collection “was very well received.” And De Beers made “significant progress” in Asia and the United States.

The company said its acquisition of the Italian luxury jewelry house Bulgari was a key highlight of the quarter.


Jewelry and watches weren’t the only quality performers for the period. Overall, the world's leading luxury goods group reported that first quarter 2011 sales increased 17 percent to 5.24 billion euros ($7.38 billion). All of its business divisions recorded strong growth for the period. The United States, Europe and Asia all recorded positive sales increases.

The Paris-based company said that following the earthquake in Japan, an important market, local teams worked hard to bring a gradual return to normal business.

The Wines & Spirits business group posted a 20 percent increase in sales to 762 million euros ($1.08 billion) boosted by strong demand in the U.S. and Asia.

The Fashion & Leather Goods business, home to the company's most prestigious brand, Louis Vuitton, reported a 17 percent sales increase to 20.3 billion euros ($28.85 billion).

Perfumes & Cosmetics sales increased 9 percent to 803 million euros ($1.14 billion) led by traditional and new products from Christian Dior and Guerlain.

The Selective Retailing business segment sales grew 20 percent for the quarter to 1.4 billion euros ($2.02 billion) due to a rise of tourism in Asia. Sephora chain of cosmetic stores continued to do well across regions, increasing its market share.

LVMH said it will continue to focus its efforts on developing its brands and maintaining control over costs. It said it will rely on “the diversification of its businesses and the good geographical balance of its revenues to increase.”

Tiffany Q4 Sales up 12%, Full-Year Sales up 31%

Tiffany & Co. said Monday fourth quarter worldwide net sales increased 12 percent to $1.1 billion due to growth in all geographic regions. Net earnings from continuing operations for the period rose 31 percent to $181.2 million. For the full year, net sales rose 14 percent to $3.1 billion and net earnings from continuing operations increased 39 percent to $368.4 million. Management also reduced its outlook for the first quarter of 2011 because of the crisis in Japan, where nearly a quarter of its stores are located.

“These strong fourth quarter sales, which were better than the holiday results we had previously reported, were the culmination of an excellent year of strong earnings growth for Tiffany,” said Michael J. Kowalski, Tiffany chairman and CEO. “Our broad-based success reflected healthy comparable store sales growth and successful new store openings in the Americas, Asia-Pacific and Europe, and highly successful new product introductions including our extraordinary yellow diamond collection.”

Net sales highlights by segment for the fourth-quarter and year-end period ended January 31:

* In the Americas region, which includes the U.S., Canada and Latin/South America, sales in the fourth quarter increased 10 percent to $577.1 million and in the full year rose 12 percent to $1.575 billion (representing 51 percent of worldwide sales). On a constant-exchange-rate basis, sales increased 10 percent in the quarter and 11 percent in the full year and comparable store sales increased 8 percent and 8 percent (comparable Americas' branch store sales increased 9 percent and 8 percent and sales in the New York flagship store rose 2 percent and 6 percent). Combined Internet and catalog sales in the Americas increased 8 percent in both the quarter and full year.

* In Asia-Pacific, sales increased 25 percent to $188.3 million in the fourth quarter and 29 percent in the full year to $549.2 million (representing 18 percent of worldwide sales). On a constant-exchange-rate basis, sales rose 21 percent in the fourth quarter, due to strong growth in most countries, and rose 23 percent in the full year; on that basis, comparable store sales rose 16 percent and 14 percent.

* In Japan, sales increased 11 percent to $182.6 million in the fourth quarter and rose 7 percent in the full year to $546.5 million (representing 18 percent of worldwide sales). On a constant-exchange-rate basis, sales increased 2 percent in the quarter and declined 1 percent in the full year; on that basis, comparable retail store sales rose 1 percent and declined 4 percent.

* In Europe, sales increased 14 percent to $137.9 million in the fourth quarter and rose 18 percent in the full year to $360.8 million (representing 12 percent of worldwide sales). On a constant-exchange-rate basis, sales rose 21 percent in the quarter, due to strong growth in the U.K. and most of continental Europe, and increased 23 percent in the full year; on that basis, comparable store sales rose 16 percent and 18 percent.

* The luxury jeweler opened nine branded stores in the fourth quarter, and opened 15 in the full year including five stores in the Americas (Baltimore, Houston, Jacksonville, Los Angeles and Santa Monica), two in Europe (Barcelona and London), seven stores in Asia-Pacific (four in China: Beijing, Shanghai (2) and Kunming; and one each in Seoul, Singapore and Taipei) and one in Japan. The company also closed two locations in Japan. The Company operated 233 stores as of January 31 (96 in the Americas, 56 in Japan, 52 in Asia-Pacific and 29 in Europe).

* Other sales declined 30 percent to $15.3 million in the fourth quarter and increased 2 percent to $54.2 million in the year (2 percent of worldwide sales).  Declines in wholesale sales of rough diamonds were partly offset in the quarter and entirely offset in the year by increased wholesale sales of finished goods to independent distributors within emerging markets.

Gross margin (gross profit as a percentage of net sales) rose to 60.9 percent in the fourth quarter from 58.7 percent in the prior year, with the increase primarily reflecting the recapture of higher product costs through retail price increases, as well as manufacturing efficiencies and sales leverage on fixed costs, the company said. Gross margin in the full year rose to 59.1 percent from 56.5 percent in the prior year due to similar factors.

Kowalski said that the company plans to open 21 stores across the Americas, Europe and Asia-Pacific in 2011 and will introduce new products and expand marketing communications efforts.

Japan Crises
Kowalski made the following statement about Japan and how it may affect sales and earnings in 2011:

“We are saddened by the tragic events in Japan. Our thoughts are with our more than 700 Tiffany colleagues and with all the people of Japan. Tiffany stores located in the Kanto and Tohoku regions, which generate somewhat more than half of sales in Japan, were closed or operating on reduced hours after the earthquake and tsunami, with physical damage limited to a few stores. Most stores have re-opened over the past weekend. Our stores in the southwestern Kansai region have remained open.

In preparing our financial expectations for 2011, we have assumed some continued periodic store closings or limited store hours in Japan through the end of the first quarter, resulting in worldwide sales growth of 11 percent in the first quarter, with total Japan sales declining 15 percent. This leads us to now expect that earnings in the first quarter will be reduced by approximately $0.05 per diluted share from our initial expectation of $0.62 per diluted share to a new expectation of approximately $0.57 per diluted share (versus the prior year of $0.48). We cannot provide meaningful forecasts about sales in Japan beyond the first quarter and, therefore, have not adjusted our sales or earnings plan for the remaining quarters of 2011.”

Outlook for 2011
Tiffany said it expects worldwide net sales growth of 12 percent – 14 percent for the full year of 2011 (ending Jan. 31, 2012), adding that it was on track to exceed that expectation in the first quarter prior to March 11, when the crises in Japan begun. This figure is based on the following assumptions:

* A low-double-digit percentage increase in the Americas;

* A 20 percent increase in Asia-Pacific;

* A mid-single-digit percentage sales decline in Japan;

* Sales increasing more than 20 percent in Europe; and

* Other sales are expected to increase more than 30 percent.

Net earnings are expected to increase 14 percent to 18 percent for 2011.

Swatch Group Sales So Strong it’s Having Trouble Meeting Demand

Swatch Group, the world's largest watchmaker, enjoyed double-digit sales growth in February, continuing the strong trend seen the month before, Reuters and other media outlets report. Even the immediate issue facing the Swiss-based company is show of its strength. It needs to hire more people and expand its production facilities because it’s facing difficulty meeting demand.

Swatch is looking to boost its workforce by up to 6 percent as it struggles to meet surging demand in most of its markets, the Financial Times reports (subscription required). The group, which employs more than 25,000 people, is looking to create 1,500 new jobs in production and distribution in Switzerland to address bottlenecks across its business.

“All segments see extraordinary demand and all markets, with the exception of Greece and Japan, are growing,” Hayek reportedly said Thursday at the group's annual results media conference. “Stock levels are very low at the moment.”

The big challenge in 2011 will be to satisfy the high demand for all its products, Hayek reportedly said, while acknowledging its hiring plans might be thwarted by a lack of qualified labor, the FT reports.

ETA, the group’s main maker of watch movements, needed 500 additional staff, the FT reports Hayek saying. It produces parts for many group brands, notably Omega, and third parties. The company will invest between 200 million and 250 million francs this year to extend its production capacity to meet demand from its core affordable Swatch product to its Breguet timepieces, according to reports.

Hayek has set a medium-term target for the company to achieve annual sales of 10 billion Swiss francs ($10.7 billion) and said he expected to reach this within three years without acquisitions, Reuters reports. The group’s sales in 2010 were 6.44 billion Swiss francs.

Last week, Hayek reportedly said in a newspaper interview the group was aiming for record sales of more than 7 billion francs in 2011, Reuters reports.

Swatch Group 2010 Sales Sets New Record

The Swatch Group reported Wednesday that sales for 2010 totaled 6.4 billion Swiss Francs ($6.6 billion), an increase at constant exchange rates of 21.8 percent over 2009 and 12.7 percent over 2008, despite capacity bottlenecks and adverse exchange rates. At constant exchange rates, the increase was 28.1 percent.

“The extraordinary strength of our brand portfolio was again reflected in an excellent performance by the Watch segment in practically all markets and price segments,” the company said in a statement. “Outlook remains optimistic in the entire year 2011 for further strong organic sales growth.”

The company’s Watches & Jewelry segment reported a 21 percent year-over-year gain at constant exchange rates, with indications that double-digit growth will continue into at least January. The company has a far reaching group of watch brands, from mass market to luxury: Breguet, Blancpain, Glashütte Original, Jaquet Droz, Léon Hatot, Omega, Tiffany & Co., Longines, Rado, Union Glashütte, Tissot, ck watch & jewelry, Balmain, Certina, Mido, Hamilton, Swatch, Flik Flak, Endura and Tourbillon.

The production segment of the company, which supplies movements and components to third-party watchmakers in Switzerland and around the world, reported an increase of 7.5 percent for the year.

The electronics segment, which supply electronic systems used in watchmaking and other industries and in the field of sports event timing, reported an 11.7 percent gain, year-over-year.

The company also it expects an improved operating margin compared to the previous year as well as higher net profit for the year, despite an unfavorable currency conditions.

The decline of the dollar and the Euro caused a three percent drop in revenue, the company said. But despite this issue, Swatch Group said it expects strong growth in 2011.

“The Swatch Group will further generate dynamic and organic sales growth in 2011 and continue investment in its distribution and the expansion of its production capacities. the company said. “Sales in January 2011 are already exhibiting a positive trend with double-digit growth in local currencies. The optimistic expectations are supported by the Group’s strategic positioning in all market segments and its geographic presence throughout the world.”

Pandora Q3 Sales Double, Profits Triple

The new darling of the jewelry industry and the investment world, Pandora, said Thursday that sales in the third quarter more than doubled and profit nearly tripled, year-over-year, driven by growth across all regions and jewelry categories, according to media reports.

Total revenues for the Copenhagen-based jewelry company grew by 117 percent year on year to 1.79 billion Danish crowns ($329,100), with 48 percent of total sales from Europe and 41 percent from the U.S. Much of that growth was due to early Christmas orders, the company reportedly said.

Sales of its top product, charms and charms bracelets (which accounted for 79 percent of total sales) increased 94 percent. Despite the high cost of precious metal, sales of silver and gold charms were up 84 percent.

Pandora’s other jewelry sectors, such as its high-end Love Pods collection, has a 345 percent sales increase. The non-charm jewelry lines accounted for 20 percent of revenues in the quarter, up from 10 percent in the same quarter in 2009.

Sales in the U.S. market rose 93 percent, representing 41 percent of total sales. The Asia-Pacific region (which accounts for 11 percent of total sales) grew by 30 percent for the period.

Net profit at Pandora rose 280 percent to 581 million Danish crowns ($106.8 million) in the third quarter. Gross margin at the group in the quarter was 73 percent, up from 66 percent in the third quarter of 2009 when the gross margin was impacted by an unrealized gain on raw materials and a negative one‐off effect from taking over the company’s Australian distributor.

“Our strong performance in the third quarter of 2010 is a result of our continued success in upgrading our existing customers, thereby increasing the share of branded sales as well as roll‐out of new stores around the world—particularly in Italy,” Mikkel Vendelin Olesen, Pandora chief executive, reportedly said. “We have seen continued strong momentum in the revenue development from our charms and silver and gold charm bracelets as well as excellent performance from our other jewelry collections. However, it is important to notice that our Q3 also is positively impacted by early Christmas orders from retailers.”

Pandora had a spectacular debut on the Copenhagen bourse on Oct. 5 with a $2 billion IPO. The company manufactures and distributes mass market jewelry, priced between $50 and $1,500, designed at its Copenhagen headquarters and made in Thailand.

Sotheby’s Revenues Up 63%, Net Loss Improves by 67%

A 1917 painting by Amedeo Modigliani titled “Nude Seated on a Divan” sold for $68.96 million at the Nov. 2 Impressionist and Modern Art Evening Sale at Sotheby’s New York, setting a new a record for the artist’s work. The auction took in a total of $263.7 million.

Sotheby’s on Thursday reported a 63 percent year-over-year increase in revenues to $73.1 million for the third quarter, at least partially due to a $14.1 million, or 48 percent, growth in auction commission revenues from strong worldwide sales. Most notable was the July London Old Master Paintings sale, which brought 85 percent higher results than the prior year. Another contributing factor was a $13.2 million increase in dealer revenues for the period due to a higher level of dealer activity.

Net loss for the third quarter of 2010 is $19.4 million, compared to $57.8 million in the prior period, a 67 percent improvement. The auction house noted that auction sales in the third quarter have historically represented approximately 7 to 10 percent of annual sales, and the third quarter has historically been a loss period.

The auction house did not separate revenues from jewelry sales in its report.

Sotheby’s margin fell from 22.7 percent to 20.2 percent in the third quarter, largely attributable to a greater number of high valued items that were sold in the period, Sotheby’s said. For items of more than $1 million, the buyer’s premium rate decreases from 20 percent to 12 percent.

Operating loss for the period was $29.1 million, a $9.1 million, or 24 percent, improvement from the prior period. The growth in revenues that led to this improvement was partially offset by a $19 million, or 23 percent, increase in expenses in the quarter, ended September 30. A substantial portion of this increase ($14 million) was due to higher dealer costs, which was offset by the increase in dealer revenues. Total expenses, excluding dealer cost of sales, increased 6 percent to $5 million.

“Outstanding auctions in all geographic regions and across nearly all collecting categories have contributed to these excellent results,” said Bill Ruprecht, Sotheby’s president and CEO. “The momentum is strong in the fourth quarter. Among the many successful sales we have had thus far, our Hong Kong series of sales last month was the unquestioned highlight. The series brought $396.4 million, our best total ever and was 55 percent above the previous record series that took place in the spring of this year. Whether in Asia, North America or Europe, there is confidence in the art market as we approach the conclusion of this remarkable year.”

“Confidence was also clearly in evidence this week with our Impressionist and Modern Art sales in New York. Our sales totaled $263.7 million, up from both our May 2010 and November 2009 sales totals,” Ruprecht continued. “Modigliani’s masterpiece, which set a new record at auction when it sold above the pre-sale estimate for $69 million, was Sotheby’s highest price in New York for a work in this category since May 2006.”

On November 30, 20 pieces from the auction of the “Jewels of the Duchess of Windsor,” held at Sotheby’s in 1987, will be offered. The jewelry includes examples of Cartier in collaboration with the Windsors as well as pieces whose inscriptions tell their love story. The combined pre-sale estimate is from $4.5 million to $6.7 million.