Report reflects economic challenges for specialty jewelers but highlights how profits can still be achieved with focused management
(NEW YORK) – Jewelers of America (JA), the national trade association for businesses serving the fine jewelry retail marketplace, has released the 2010 Jewelers of America Cost of Doing Business Report, which analyzes retailers’ financial data from 2009. The Report, which has been published annually for two decades, represents the most complete and historical comparative financial information available to specialty jewelers in the U.S. It compiles data from a cross section of jewelers, including independent high-end firms (25.8%), independent mid-range firms (57.9%), jewelry chains (9.1%) and designer/artist/custom jewelers (13.2%).
Benchmarking Tool Key to Higher Profits
Jewelers of America developed the Cost of Doing Business Report to help independent jewelers take control of their business management and affect positive change in their business profits. The 103-page Report makes it easy for retailers to benchmark their business operations against those of their competitors, with data tables organized by jeweler category, size and high- or low-profit firms.
Why is benchmarking important? “Each year, the Jewelers of America Cost of Doing Business Report reveals that better profits can be achieved when managers and owners pay strict attention to their operational expenses and performance,” explains David Peters, Director of Education & Member Services. “Jewelers who use the Report’s comprehensive data tables to benchmark and develop management strategies discover areas where they can cut costs and plan for future growth.”
Sales in Decline, Profits Improving
As the Report covers financial data from 2009 – a year in which the national economic crisis left no industry unscathed – it’s no surprise that respondents reported a median overall sales decrease of 4.5%, a 1% greater decline than in 2008. For the second year, chains reported the steepest declines (-13.6%) and showed little change from 2008 (-13.2%). Independent high-end retailers had a decline of 7.5%, compared to -1.3% in 2008. The bright spots came from designer/artist/custom jewelers, who had a median sales increase of 3.1%, up from -.8% in 2008, and mid-range retailers, whose -.9% median sales growth is up from -5.5% in 2008.
The 2010 Jewelers of America Cost of Doing Business Report reflected a positive shift in the areas of specialty jewelers’ profitability and gross margins. Industry profitability in 2009 held steady, with specialty jewelers experiencing a median 3.8% net profit as a percent of net sales versus 3.6% in 2008. In 2009, gross margins recovered across all store types, with 49.4% as the median overall gross margin, compared to 48.6% in 2008.
High-Profit vs. Low-Profit Stores
Jewelers who use the Report to compare their performance to the high-profit data tables often identify where costs can be effectively cut. According to the Report, “Inattention to operations resulting in small cost increases in a number of areas appears to explain much of the difference between being very profitable and not profitable. Low-profit does not mean low sales volume.”
The 2010 Jewelers of America Cost of Doing Business Report demonstrates that effective management is critical during economically challenging times, when even high-profit firms experienced -.9% sales growth on average. However, the flat sales growth of high-profit firms looks favorable when compared to the 7.8% sales decline reported by low-profit firms.
In 2009, high-profit stores reported almost 100% greater sales per store than their low-profit peers (an average of $2,122,998 compared to $1,478,504). They also reported a much greater ratio of earnings before interests and taxes (EBIT) to total assets: 16.4% on average compared to -2% of low-profit firms. Higher operating expenses continue to be a downfall of low-profit firms, with their high-profit peers spending less on payroll, occupancy and advertising. In fact, high-profit retailers reported an average of 8.7% less on total operating expenses than low-profit firms.
Distribution of Sales
The distribution of sales remains relatively consistent year to year. In 2009, the diamond category (loose and set) remained the majority, with 46% of sales, down 3% from 2008. The next biggest product categories are colored stone jewelry (8% of sales) and karat gold (8%). Repair sales remain an important category, bringing in 10% of sales.
How Data Is Compiled
Jewelers of America produces the Cost of Doing Business Report through a partnership with National Jeweler magazine and its “America’s Best Jewelers” program. The Report reflects data taken from an anonymous Cost of Doing Business Survey of both Jewelers of America members and retailers from National Jeweler’s database.