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High-Ticket Hopes for Holidays
By Cara Woudenberg · Online Editor

The upcoming holiday season has everyone buzzing about the economy and, of course, retail sales expectations. Despite factors like hurricanes, rising gasoline prices, the war in Iraq, and a looming presidential election, at press time jewelers were anticipating the best — or at least, not the worst. But as high-end retailers move forward with confidence, lower-end retailers fear being on the losing end.

Even with a dip in retail sales mid-year, 2004 has been a good year for most retailers, and luxury markets have been especially strong. Jewelry retailers report an increase in sales for the first three quarters of the year, and most expect that trend to continue for the rest of 2004 and the holiday season.

"[Right now] we are ahead of last year — almost back to normal," said William A. Weidinger, a goldsmith and jewelry designer in Columbus, Ohio. "If this year's sales trends continue, then I think that sales will be very good this season."

Business has certainly been good for Jane Wullbrandt, an Atlanta-based jewelry designer who works at a retail store in addition to running her own wholesale business. "In the retail store, there have been increases every month. And with my design business, it has been a great summer; it has been slow only [in early September]," which she attributed to the hurricanes plaguing Florida and other areas of the South, where many of her customers are located.

She, too, expects that this year's good sales will carry over to the shopping season ahead. "I anticipate a good holiday season," declared Wullbrandt. "I expect sales to be up over last year. Both businesses have increased every year, and I think that will continue."

Analysts seem to agree, although some predictions are slightly conservative due to factors like higher energy costs, rising interest rates, slow job creation, and high consumer debt levels. The National Retail Federation (NRF) has projected holiday retail sales to increase 4.5 percent this coming season, compared to a 5.1 percent increase for the same period last year.

Retail Forward, a consulting and market research firm specializing in retailing, expects the 2004 holiday season to be the best since 1999 for most retail lines of trade. Their forecast is for 6 to 6.5 percent year-over-year growth in the fourth quarter for key measures of holiday sales. "The outlook for the holiday season should not be deterred by recent weak job growth and high fuel prices," comments Frank Badillo, Senior Economist for Retail Forward. "Lean inventories and firm prices should help. Retail sales should also continue to be boosted by a healthy housing market," he adds.

A preliminary holiday forecast of retail sales issued by Ernst & Young LLP foresees a similar increase of 6 to 7 percent for November and December, with much of the growth attributed to the luxury sector. For the jewelry industry specifically, the report predicts that higher-income consumers, who are less concerned about the price of gifts than about achieving the "right look," could be poised to spend money on fine jewelry. The stock market and the economy will have a strong influence on whether or not they do.

"I think the stock market will have a significant affect on retail sales," said Jay McIntosh, director of retail and consumer products for the Americas with Ernst & Young, in an interview with Colored Stone. "We think that the affluent consumer will drive the holiday season this year, and the stock market affects these consumers the most.

"We do think that luxury items like jewelry will have a very strong holiday season," he continued. "The low-income consumer has clearly been hurt more by unemployment, rising gasoline prices, and high food prices. . . . Discount and dollar stores are not looking to have a good holiday season, and we don't expect them to have one. Upscale retail will do better."

A study conducted by the Jewelry Consumer Opinion Council in June also produced encouraging results regarding gift-giving predictions for the holidays. Almost 30 percent of respondents said they were "extremely likely" to purchase fine jewelry as a gift this holiday season, with nearly 50 percent saying they were "somewhat likely."

Inevitably, the social and political factors ruling the country today will have an effect on retail sales, but the extent is not clear. McIntosh believes that the upcoming presidential election will not have as much of an impact as people might think. "I think that real economic factors will affect retail sales more [than the election]," he said.

But Wullbrandt expects the election results to influence her customers' decisions on spending. Most of her customers are in a higher income bracket and tend to be Republican. "I think these people would like to stay with the status quo," she observed.

"Of course there will be effects [of the election]," said Weidinger. "Decisions that politicians make will affect business. . . . Let's just hope the war will be resolved quickly," he added, "because our business is about love."

Illustration by Joe Rocco.

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September/October 2004 • Style: Two Great Tastes • Sources: Rough Times • Bonus: Inside the Design • Bonus: Mine Production Update • News & Updates • In This Issue