The latest European retail figures show that the market remains challenging and this was highlighted at the weekend when the news broke that Anglo-American jewellery
giant Signet Jewelers is considering selling its UK business.
British newspaper The Sunday Telegraph reported this weekend that the company is sounding out a number of private equity firms about the possibility of buying its UK business, and that it has given its financial adviser firm Lazard the job of finding out what price the sale could achieve. This is big news for the UK jewellery
market, where Signet Jewelers is a key player and currently operates 540 stores across its Ernest Jones, H Samuel and Leslie Davis fascias. Both Lazard and Signet Jewelers have declined to comment on the reports, but a potential sale would hardly be surprising.
The company’s UK sales have consistently lagged behind its more successful US business, where it operates 1,317 stores across its Kay, Jared and regional brands facias. The US market is beginning to recover from the recession and in the Fiscal year 2011 its US sales rose 8.9% to €1,9bn ($2,744.2m) and accounted for 79.8% of its global sales, while the situation has remained more challenging in the UK market, which accounts for just 20.2% of its global sales. Its UK business saw a sales decline of 5.5% to €485m) $693.2 million in the same period, and the retailer has already revealed that it will continue to focus on prime locations and close 22 stores in this financial year.
However, Signet Jewelers’ struggle in the UK market reflects the wider challenges the European jewellery industry is facing. The latest European retail figures, provided by Eurostat, show that in March the volume of retail trade fell by 1% against the month before in the Euro area and 0.8% across the wider European Union, while year-on-year the retail sales index fell 1.7% in the Euro area and 1% in the wider European Union. Spain saw the largest decrease in retail trade at 9.6%, followed by Denmark at 8.7%, and perhaps least surprisingly, due to its recent economic problems, Portugal saw a decrease of 6.8%.
|Signet's Ernest Jones store in Derby, England.|
Despite these difficulties it’s not all doom and gloom and there is evidence of the returning strength of high-end watch and jewellery sales. French luxury goods group LVMH reported a recovery in its watches and jewellery business in the first quarter of this year, resulting in organic growth of 20% to €261m ($372m) in the segment, while the newly LVMH-acquired Bulgari also reported strong first quarter results. The Italian luxury goods group saw a 21.9% increase in its watches business and growth of 29.3% in its jewellery segment, while its turnover increased 27.5% to €254.7m ($363.3m).
Clearly the European market remains difficult and watch and jewellery demand is a long way off from pre-recessionary levels. But despite the latest retail figures suggesting the market remains flat the experience of Europe’s high-end jewellers show that consumers in the region are gradually gaining in confidence. Companies that are looking to invest in the European market should be aware that consumers in the region may be shopping less frequently and buying in smaller volumes, but when they do spend they are willing to pay more for quality high-end watches and jewellery that will last them beyond this year and next.