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Is the American jewellery-buying public ahead of the curve compared to general consumer buying? Despite the country's ongoing economic ills, with obstinately high unemployment and a housing market still in a state of disarray, consumers have been increasing their purchases of jewellery for most of this year.

 

Indeed, whereas the American market has been underperforming Asia in other areas, when it comes to jewellery it is doing a better job of keeping pace. According to U.S. government figures, jewellery store sales for September jumped 14.6 percent on the year in the first three-quarters of 2011. And, while it is still early days yet, reports from the jewellery sector following the critical Thanksgiving Day weekend, which is traditionally regarded as the start of the Christmas shopping season in the United States, have been almost universally upbeat.

 

In general, the mood of the American retail market is better than it has been in a while. Led by discretionary purchases, sales in October increased by 0.7 percent from September and by 4.7 percent over last October, the National Retail Federation said. However, the strong rise could have been due to early holiday promotions. “Retailers’ seemed to strike the right chord with shoppers last month,” said National Retail Federation President and CEO Matthew Shay. “Knowing the economy is still a big factor in customers’ shopping decisions, retailers will continue to offer great deals and exceptional value throughout the holiday season.”

 

And the widely watched U.S. Conference Board Consumer Confidence Index, which had declined in October, showed an improvement in November, rising to 56.0 from 40.9 in October. The Present Situation Index and the Expectations Index both rose. "Confidence has bounced back to levels last seen during the summer," said Lynn Franco, Director of The Conference Board Consumer Research Center.

 

"Consumers' assessment of current conditions finally improved, after six months of steady declines. Consumers' apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably. Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak," Franco added.

 

What's behind the rising sales in the U.S. market? According to noted diamond jewellery analyst Ken Gassman, one should look past the once-declining consumer confidence index or the fact that the American political system is deadlocked.

 

"I say, ignore those factors," Gassman said. "Unemployment is still high and the housing market is still very bad, but it is amazing that these factors do not seem to matter. They simply do not correlate to consumer sales. You would think that when times are bad, sales would also drop sharply, but that is not the case.”

 

"There is a well-known expression that when the going gets tough, people go shopping. Frankly, it is that simple. As far as jewellery is concerned, people are shifting money from other categories in order to give themselves a treat. After going through a tough period over the last three years, people want to reward themselves with something special. Americans are born to shop, and although there has been a slowdown in the past few years, the basic consumer mentality has remained in place," he added.

 

Gassman said that data from the Commerce Department showed that sales of jewellery were up 14.6 percent in the year to September despite rising prices for precious metals, while sales measured in dollar terms were up 12 percent. However, he believes a rise in the mid-to-high single-digit range seems more likely. "Over the next couple of years, I estimate that rises in jewellery sales gains will be around 4 percent annually," Gassman said.

 

On Tuesday, up-market jeweller Tiffany & Co. reported a 63-percent rise in fiscal third-quarter earnings, with solid sales growth in each of its geographic regions. Tiffany reported a profit of $89.7 million for the quarter ended October 31, up from $55.1 million from a year earlier. Sales surged 21 percent to $821.8 million, or 17 percent when stripping out currency fluctuations. Total same-store sales soared 16 percent excluding currency fluctuations, compared with a 7 percent rise last year. Meanwhile, sales soared 24 percent at the company's Fifth Avenue flagship store in Manhattan, boosted by the record number of tourists visiting New York.

 

Tiffany has posted double-digit rises in profits in each quarter this year. In addition, same-store sales have been stronger than those its mid-range competitors with its consumers more willing and able to spend on gifts and other discretionary purchases. The firm reported a 17-percent increase in sales growth in the Americas, which accounted for most of the total sales.

 

Further evidence of the rising strength of U.S. jewellery sales is seen in the financial turnaround at retail giant Zale Corp which operates more than 1,800 stores in North America. Indeed, the firm's stock jumped close to 23 percent on one day in late September after Chief Financial Officer Matt Appel gave investors reassurance that its three-year turnaround program was working.

 

Appel said that Zale was "trending in the right direction," aided by the replacement of underperforming staff, rising revenue at stores open at least a year, and partnerships with celebrities such as Vera Wang and Jessica Simpson on exclusive product lines. The current situation is a large improvement on the decline the company underwent following the onset of the global financial crisis exactly three years ago.

 

Zale Corp's revenue figures slumped during the recession of 2009, hit by consumers slashing nonessential spending, difficult credit conditions as banks reduced their lending, and high unemployment. It has closed hundreds of stores over the past two years and moved top management around, as well as letting some go, as part of its turnaround program.

 

In the latest results, for its fiscal fourth quarter, which it reported in late August, the chain posted an increase in sales in its fiscal fourth quarter of 9.4 percent from the same period of last year to $377.3 million. The retailer said that same-store sales, an important pointer for the direction of retailers, rose by 9.8 percent. The company said that the fourth quarter was the third consecutive three-month period of positive same store sales. For the fiscal year 2011, Zale posted a 7.9-percent increase in revenue to $1.74 billion.

 

Also in the mid-range of the jewellery market, Signet Jewelers, the world’s largest specialty retailer of fine jewellery, reported that third-quarter sales jumped 10.7 percent on the year to $710.5 million. The jeweller's results were boosted by a 10.6-percent increase in same store sales. Meanwhile, pre-tax income for the period ended October 29 was $42.1 million, up from $12 million for the third quarter of last year.

 

Significantly, the company, which runs around 1,860 retail jewellery stores in the United States and Britain, said its third-quarter results were bolstered by U.S. sales, while its U.K. sales were more or less unchanged on the year. The company's approximately 1,324 stores in the United States account for about 80 percent of annual sales, and posted a 13.3-percent rise in sales in the quarter to $563 million. Meanwhile, same store sales jumped 13.9 percent.

 

Some analysts believe that reports of the decline of the U.S. jewellery market have been exaggerated. "It is true the United States' share of the global jewellery market has fallen to around 40 percent from its long-time 50-percent share, but it remains the most important market in the world," said James Porte, of the Porte Marketing Group. "In addition to discretionary spending on jewellery, there are 2.4 million weddings a year in the United States and 1.9 million engagement rings are sold," he said.

 

As for the general U.S. jewellery market, the boost in jewellery purchases could be coming from middle-level income earners making at least $100,000 who are feeling better about the economy and the super rich, according to research firm Ipsos Mendelsohn. A study by the company based on interviews with more than 2,000 affluent people and 1,000 non-affluents over two months found that their consumer optimism was strong.

 

But not all the news was good, as least from the jewellery sector’s perspective. The Ipsos Mendelsohn study also found that the consumer's idea of what a luxury purchase was is changing and is highly subjective, with a two-hour massage, or a facial in a spa frequently fitting the bill. In other words, consumers are lowering the luxury bar, with many items far cheaper than jewellery fitting the bill. "That is a new component in the evolution of luxury," the report said.

 

Although traditional luxury brands were cited, such as Cartier, Louis Vuitton, and Patek Philippe, respondents also said luxury was less an issue of price than an experience, which could mean chocolate truffles, a fancy coffee machine, or imported cheese. Testimony of the changing nature of what constitutes a luxury product was provided by two-thirds of affluent respondents saying they define luxury differently today than they did even five years ago.

 

In addition, affluent consumers do not believe that value pricing hurts a luxury brand. Among affluent people, 90 percent of affluents admitted to going out of their way to find the best price. "Fewer than half said true luxury is worth any additional cost and fewer than half also said true luxury does not go on sale, and even fewer said when a luxury product goes on it sale it lessens the perception of luxury. So consumers are bringing a very strong value orientation even to highest-ticket items."

 

"There is a strong sense that luxury is not stereotypical, but personal. Back in 2005 or 2006, there was a more shared sense of what luxury is, but today it's much more personal and idiosyncratic. It’s about a feeling of 'I deserve' more than anything. And rarely were they talking about how it appears to others; it's much more about self-gratification."