{"id":18786,"date":"2022-12-13T17:00:37","date_gmt":"2022-12-13T11:30:37","guid":{"rendered":"https:\/\/gjepc.org\/solitaire\/?p=18786"},"modified":"2022-12-13T17:39:06","modified_gmt":"2022-12-13T12:09:06","slug":"how-a-post-pandemic-return-to-travel-entertainment-is-impacting-consumer-diamond-demand","status":"publish","type":"post","link":"https:\/\/gjepc.org\/solitaire\/how-a-post-pandemic-return-to-travel-entertainment-is-impacting-consumer-diamond-demand\/","title":{"rendered":"How A Post-Pandemic Return To Travel & Entertainment Is Impacting Consumer Diamond Demand"},"content":{"rendered":"\n

The re-availability of experiential consumer options such as travel and entertainment could be drawing some discretionary spending away from the jewellery category, reports diamond analyst Paul Zimnisky.<\/strong><\/em><\/h4>\n\n\n\n
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Paul Zimnisky<\/figcaption><\/figure><\/div>\n\n\n\n

In December, Signet Jewelers, the largest diamond retailer in North America, said its same-store-sales fell by almost 8% year-over-year in the company\u2019s most recently concluded fiscal quarter which ended 31st October.<\/p>\n\n\n\n

Management attributed the results in part to a \u201cconsumer behavior shift,\u201d implying a softening of customer sentiment due to the current macroeconomic backdrop but also a consumer transition back to more \u201cexperience\u201d discretionary spending \u2013 as the Western world has emerged from pandemic related restrictions over the last two years.<\/p>\n\n\n\n

Global diamond jewellery sales grew to almost $90 billion in 2021 according to Paul Zimnisky estimates, as confident consumers (boosted by economic stimulus) looking to give meaningful gifts bought diamonds. This situation was enhanced by the unavailability of traditionally competing experiential consumer options such as travel and entertainment.<\/p>\n\n\n\n

Earlier this year, Signet management did caution that some consumer discretionary spending could move away from the jewellery category \u201creflecting pent-up demand for experience-oriented categories.\u201d<\/p>\n\n\n\n

The pandemic also brought about a multi-decade boost in marriage engagements which peaked in 2021. This drove bridal diamond jewellery sales to record highs. Although the momentum has since begun to normalise in recent quarters.1<\/sup><\/p>\n\n\n\n

Consequently, in August, Signet cut full year sales guidance to $7.6-7.7 billion, a 6% cut, implying a year-over-year sales decline of about 2% for the fiscal year ending January 2023.2<\/sup><\/p>\n\n\n\n

That said, the company\u2019s comparable sales this year are still on pace to be 25%-plus higher than pre-pandemic levels \u2013 an indication that the company, and the larger industry, has maintained an impressive amount of the ground it has gained over the last two years.<\/p>\n\n\n\n

While the West spent 2022 emerging from the pandemic, jewellers in Greater China are still dealing with severe disruptions as the Chinese government has maintained a strict \u201cZero-Covid\u201d policy into this year.<\/p>\n\n\n\n

In March, the major Chinese city of Shenzhen was partially locked down after a new Covid-19 outbreak. While measures in Shenzhen were eased just a few weeks later, subsequent lock-downs in other important metro areas, including parts of Shanghai and the city of Jilin in north-east China, followed. Then, in September, Chengdu, a city of over 20 million people and the capital of China\u2019s Sichuan province, was \u201cfully\u201d locked-down.<\/p>\n\n\n\n

Other major cities in China including Xian and Guiyang have also been locked down this year.<\/p>\n\n\n\n

The measures have negatively impacted the entirety of the Chinese economy \u2013 and this year, jewellery as a category in China has not outperformed as it did during 2020 and 2021.<\/p>\n\n\n\n

In the six months ended September, Greater China major, Chow Tai Fook\u2019s same-store-sales fell 8%.3<\/sup> In late-November, management said that the trend has continued post-period end.<\/p>\n\n\n\n

LVMH, the world\u2019s largest luxury conglomerate said in October that customer traffic in Mainland China is \u201cstill nowhere near 2019 levels.\u201d LVMH operates notable jewellers including Tiffany & Co. and Bulgari. In recent years, China has represented upwards of 30% of LVMH\u2019s global sales across categories.<\/p>\n\n\n\n

Looking ahead, speaking to the impact of the 2022 lockdowns on its business, Chinese jeweller Luk Fook noted that it still expects to achieve \u201cdouble-digit\u201d revenue growth in the current fiscal year ending March 2023 and \u201crecord high profit\u201d in three years\u2019 time due to \u201cthe progressive relaxation of the lockdown measures in the Mainland\u201d as well as \u201cthe government\u2019s commitment to implementing economic push measures and consumption encouragement policies\u201d \u2013 referring to the Chinese government\u2019s \u201cDual Circulation Strategy\u201d and \u201c14th Five-Year Plan.\u201d<\/p>\n\n\n\n

The former is a Chinese economic policy that was implemented in early-2020 aimed at stimulating domestic consumption while remaining open to international trade and foreign investment. The latter is the latest in a series of social and economic development initiatives first implemented by the government in 1953.<\/p>\n\n\n\n

The U.S. is estimated to represent approximately 50% of global diamond jewellery demand. China is estimated to be approaching 20% of global demand.<\/p>\n\n\n\n

\n\n\n\n
  1. During an analyst call in December, Signet CEO Gina Drosos said that the company expects a another \u201cslight downtick\u201d in engagements in 2023.<\/em><\/li>
  2. In December, Signet management raised guidance to ~$7.8 billion, however, the new forecast also includes contribution from the recent acquisition of Blue Nile, so the figures are not necessarily comparable.<\/em><\/li>
  3. Despite the difficult operating conditions, Chow Tai Fook has continued its impressive store expansion strategy which has driven top-line revenue gains this year. (See more here: https:\/\/www.paulzimnisky.com\/chow-tai-fook-new-store-openings<\/a>)<\/em><\/li><\/ol>\n\n\n\n
    \n\n\n\n

    Paul Zimnisky, CFA is a leading independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis of the diamond industry please consider subscribing to his <\/em>State of the Diamond Market<\/em><\/a>, a leading monthly industry report; an index of previous editions can be found <\/em>here<\/em><\/a>. Also, listen to the <\/em>Paul Zimnisky Diamond Analytics Podcast<\/em><\/a> on iTunes or Spotify. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at <\/em>paul@paulzimnisky.com<\/em><\/a> and followed on Twitter <\/em>@paulzimnisky<\/em><\/a>.<\/em><\/p>\n\n\n\n

    Disclosure: At the time of writing Paul Zimnisky held a long equity position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc, Brilliant Earth Group and Barrick Gold Corp. Paul is an independent board member of Lipari Diamond Mines, a privately-held Canadian company with an operating kimberlite mine in Brazil and a development-stage asset in Angola. Please read full disclosure at <\/em>www.paulzimnisky.com<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    The re-availability of experiential consumer options such as travel and entertainment could be drawing some discretionary spending away from the jewellery category, reports diamond analyst Paul Zimnisky. In December, Signet Jewelers, the largest diamond retailer in North America, said its same-store-sales fell by almost 8% year-over-year in the company\u2019s most recently concluded fiscal quarter which…<\/p>\n","protected":false},"author":7,"featured_media":18792,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107,79],"tags":[],"thb-sponsors":[],"class_list":["post-18786","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retail","category-viewpoint"],"acf":[],"yoast_head":"\nHow A Post-Pandemic Return To Travel & Entertainment Is Impacting Consumer Diamond Demand - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/gjepc.org\/solitaire\/how-a-post-pandemic-return-to-travel-entertainment-is-impacting-consumer-diamond-demand\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How A Post-Pandemic Return To Travel & Entertainment Is Impacting Consumer Diamond Demand - Solitaire magazine is a International jewellery magazine - India\u2019s leading B2B gem and jewellery magazine\" \/>\n<meta property=\"og:description\" content=\"The re-availability of experiential consumer options such as travel and entertainment could be drawing some discretionary spending away from the jewellery category, reports diamond analyst Paul Zimnisky. 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