Logo-Laden Jewelry Challenges Tiffany This Holiday Season
Stock Chart for Tiffany & Co (TIF)
In Christmases past, gentlemen headed to their trusty local jewelry shop to buy generic gems for their significant others -- strands of pearls, diamond-stud earrings.
This year more are visiting luxury department stores and boutiques and dropping premiums on branded fine jewelry from fashion houses including Ralph Lauren Corp. (RL), Gianni Versace SpA and Salvatore Ferragamo Italia SpA. (SFER) Celebrity jewelers such as glam-rock-inspired Stephen Webster are feeling the love, too.
Well-heeled consumers are developing a taste for precious adornment that broadcasts its brand provenance either by incorporating such well-known logos as Versace’s Medusa head or using distinctive designs like David Yurman’s chunky carved cable silverwork.
“Jewelry was the last luxury product sold largely anonymously,” designer Webster said in an e-mail. “Brands caught wind of that and, of course, brands cannot be anonymous.”
Branded jewelry sales will double to 30 percent of the $59.2 billion U.S. fine jewelry market in the next decade, said Ken Gassman, president of the Jewelry Industry Research Institute. The new entrants are competing with Tiffany & Co. (TIF) -- which last month cut its annual profit forecast for the third time this year -- and may further decimate the thinning ranks of specialty jewelers. The U.S. had 22,330 specialty jewelers in 2011, down 28 percent from their 1987 peak, Gassman said.
“The fact that many top-tier luxury brands are targeting jewelry creates intense competition, and squeezes Tiffany,” said Milton Pedraza, chief executive officer of the Luxury Institute, a New York-based luxury consulting firm.
The race is on this month because the holiday period generates 30 percent of jewelers’ annual sales, making them more dependent on November and December than any other retail segment, according to the National Retail Federation, a Washington, D.C.-based trade group. Most of the sales occur in December and a quarter of them in the week before Christmas, said Michael McNamara, a vice president for Purchase, New York- based MasterCard Advisors SpendingPulse.
Jewelers are fighting for market share while facing weak consumer demand for lower-priced baubles as well as higher raw- product costs. Purchases of jewelry sold at the top 10 percent of prices fell 3.2 percent in the retail fiscal year through November, compared with a 13 percent jump a year earlier, according to SpendingPulse figures for transactions in all payment forms.
New York-based Tiffany said Nov. 29 that sales growth at stores open at least a year in the Americas shrank to 1 percent in the third quarter from 15 percent in the same period a year earlier. The 54 percent premium that investors were willing to pay for Tiffany shares over the Standard & Poor’s 500 Consumer Discretionary Index in mid-2011 has all but vanished, according to data compiled by Bloomberg. Tiffany fell 0.3 percent to $58.42 at the close in New York.
Neiman Marcus Group Inc., which sells brands like Yurman and Webster, saw “very strong” precious jewelry sales at the Dallas-based luxury retailer in its last quarter, Chief Executive Officer Karen Katz said on a Nov. 28 conference call.
Branding is good for the industry because converting jewelry from an evergreen investment that you hand on to your heirs into a fashion accessory that goes out of style drives sales by spurring replacement purchases, Gassman said.
“Consumers have a romance with brands,” he said, “They are a shortcut to status. ‘Oh! This is a David Yurman necklace.’”
The branding trend accelerated after the recession as luxury goods companies sought new areas of growth to complement their existing lines and keep attracting customers in the increasingly mature U.S. and European markets, said Hana Ben- Shabat, a New York-based partner in the retail practice at A.T. Kearney, a management consulting firm. The recent popularity of colored stones also has fueled the trend toward designer jewelry, Ben-Shabat said.
“It gives more room to play with jewelry rather than just deal with diamonds and gold,” she said.
As a result, the number of jewelry brands sold by luxury department-store chains has exploded in recent years, Ben-Shabat said. Go to the website of Macy’s Inc.’s (M) Bloomingdale’s chain and you see more than 30.
“We’re very excited about the business,” Michael Gould, chairman of Bloomingdale’s, said in a phone interview. “We’ve added more space in all our stores to our fine jewelry departments.” The retailer also has enhanced its in-store shops, particularly those of designers Yurman, John Hardy, Roberto Coin and Ippolita, which are doing very well, he said.
A challenge for designers is figuring out how to signal the brand through the jewelry, Gassman said. “There are not nearly the opportunities to broadcast the brand as there are in clothes and handbags,” he said.
Ferragamo, a recent entrant into the category with a $200 to $15,000 collection that arrived in stores in October, stamps the letters of the Ferragamo name on a round diamond-pave pendant, and evokes the Florence Italy-based shoemaker’s “gancino” clasp in its rings. Versace uses its Medusa head icon on some of the oversized rings that are part of the “Atelier” line of jewelry it unveiled in the summer. Each piece is unique and prices are not disclosed publicly.
The five fine jewelry collections that Ralph Lauren has produced with Cie. Financiere Richemont SA (CFR) -- the world’s largest luxury jewelry maker and owner of Cartier -- includes pearl strands that incorporate designer Ralph Lauren’s monogram.
Tiffany, No. 2 behind Richemont, has some easily recognizable jewelry of its own, too, and has emblazoned its name most obviously on its “Return to Tiffany” silver jewelry collection. Mark Aaron, a spokesman, declined to comment for this article.
The risks of producing branded gems are greater for jewelry designers than for the luxury-brand giants because they are starting from scratch, and must stand out in the highly crowded market to succeed, Ben-Shabat said.
Webster, 53, founder and creative director of his namesake London-based brand, made a mark by bringing what he describes as “edge” to fine jewelry, and he has shown a modern savvy in building up his brand. He has appeared as a guest judge on Project Runway and produced brand videos that are posted on YouTube. His jewelry inspirations range from thorny tattoos to shark jaws.
“We have a certain type of jewelry and it is attractive to people who want to sort of show off,” the rugged Webster says in one of his videos. “The minute you see it, you kind of get it.”
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