US Jewelry Marketplace
Total US jewelry sales, including watches and fashion jewelry, are provisionally estimated by the BEA to have been $58.8 billion in calendar 2009. The BEA figures are subject to frequent and sometimes large revisions. During July 2009, the BEA made significant downward revisions to its sales database back to 1993.
The US jewelry market has grown at a compound annual growth rate of 4.5% over the last 25 years. While Signet’s major competitors are other specialty jewelers, Signet also faces competition from other retailers that sell jewelry including department stores, discount stores, apparel outlets and internet retailers. Management believes that the jewelry category competes with other sectors, such as electronics, clothing and furniture, as well as travel and restaurants for consumers’ discretionary spending, particularly with regard to gift giving but less so with regard to bridal (engagement, wedding and anniversary) jewelry.
Fiscal 2010
In calendar 2009, the US jewelry market contracted by a provisional estimated 1.9% (source: BEA), reflecting the continuing challenging economic environment. Based on provisional estimates, the specialty jewelry sector fell by 3.9% to $27.2 billion in calendar 2009 (source: US Census Bureau). As with the BEA figures, during 2009 downward revisions were made to the US Census Bureau figures for the preceding four years. The specialty sector saw a provisional decline in market share to 46.2% in calendar 2009 from 47.1% in calendar 2008.
Long term performance
Jewelry sales have, over the longer term, grown broadly in line with personal consumption expenditure. Jewelry sales are seasonal as the primary reasons to purchase jewelry and watches are for bridal related occasions and gift giving events such as Christmas, birthdays, Valentine’s Day and Mother’s Day. Jewelry is also purchased for self reward and as a fashion accessory. The rate of growth accelerates and slows broadly in line with major non-food retail categories as the majority of jewelry sales are made in the middle mass market.
Management believes that the long term outlook for jewelry sales is encouraging given the expected growth in disposable income and the increasing number of women in the work force. However, as seen in calendar 2008 and 2009, jewelry sales are subject to fluctuations in the general level of retail sales.
Scale advantages
The US division’s share of the specialty jewelry market increased to 9.4% in calendar 2009 from 9.0% in calendar 2008, based on initial estimates by the US Census Bureau. Kay and Jared were two of the top four specialty brands. Only these four brands had a level of sales that enabled the cost effective use of national television advertising, the most efficient form of marketing in the US. Of the two other brands, only one targeted the middle market segment, which is the primary customer of Signet’s US division. Independent retail jewelry stores including medium and smaller regional chains (defined as having sales of less than $500 million) together are believed to account for over 70% of the speciality market.