Despite a recent leveling off, the yearlong increase in gold prices has hit the bottom lines of both retailers and designers, who say they have had to increase prices and cut their margins to cope.
Most, however, say they have not changed the quality of their products.
"The cost of gold increasing has put some pressure on our commodity costs," says David Sternblitz, vice president and treasurer of Zale Corp. "We had some targeted price increases in the spring."
He declined to reveal the level of the increase, but said higher prices, which went into effect after Valentine's Day, have not harmed sales.
"Some customers come in and they see more value in gold product because of what they read about gold prices," Sternblitz says. "There is more perceived value there."
In addition to raising prices, the mass-market chain has tried to cut costs by working more with producers through a sourcing initiative, reducing the number of SKUs in stores and by planning purchases more carefully and further out.
The company has not opted for lighter-weight pieces or products made of lower-karat gold.
"Our customer tells us what they want," Sternblitz says. "They continue to want better quality and better value. We are not substituting product."
To reduce the SKUs in stores (part of a cost-cutting plan by new Chief Executive Officer Neal Goldberg), Zale has run a lot of clearances that have boosted gold sales for the company, Sternblitz says.
Same-store sales at Zale Corp. increased 5.8 percent for the third quarter ended April 30, while revenues grew 6.3 percent to $477 million amid an aggressive clearance strategy that liquidated $55 million of inventory.
In the 2007 Jewelers of America Cost of Doing Business Survey, gross margins on karat-gold jewelry were among the highest, at 55.1 percent, surpassed only by fashion jewelry and repairs, with margins of 56.2 percent and 60 percent, respectively.
The information from:www.fashion-accouterment.com
