US Overview

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. In fiscal 2010, the US division’s same store sales fell by 3.5% in the first three quarters, but increased by 7.4% in the fourth quarter. Spending by higher income consumers was weak in the first three quarters, but began to recover in the fourth quarter and this was reflected in the performance of Jared. Total sales in fiscal 2010 were $2,557.5 million (fiscal 2009: $2,536.1 million), being about 78% of sales (fiscal 2009: 76%).

The division targets the middle market through Kay Jewelers (“Kay”), which trades nationwide in malls and, increasingly, in outdoor shopping centers. Kay is the largest specialty retail jewelry brand in the US and accounted for 46% of sales (fiscal 2009: 43%). The division also targets the middle market sector through a number of well established and recognised regional brands trading in malls. The regional stores amounted to 10% (fiscal 2009: 11%) of sales.

The division’s off-mall destination superstores target the upper middle market and trade as Jared The Galleria Of Jewelry (“Jared”). The 178 stores are equivalent in space terms to over 700 US division mall stores. Jared, which accounted for 22% of sales (fiscal 2009: 22%), became the fourth largest US specialty retail jeweler by revenue in fiscal 2007. It is by far the largest chain of middle market off-mall destination jewelry stores and the only one with national coverage. As a destination store Jared offers a wider selection of merchandise than mall stores at highly competitive prices.

Operating structure
While the US division operates under 12 different brands, many functions are integrated to gain economies of scale. For example, store operations have a separate dedicated field management team for the mall brands, Jared and the in-store repair function, while there is a combined diamond sourcing function.