Luxury jeweler and mining firm Harry Winston Diamond Corp. said Thursday it swung to a loss in the fourth quarter as its retail sales sank 20.8 percent for the period.
This story first appeared in the April 3, 2009 issue of WWD. Subscribe Today.
Weighed down by noncash goodwill impairment related to retail operations totaling $93.8 million, or $1.53 a share, the Toronto-based firm recorded a net loss of $73 million, or $1.19 a diluted share, for the quarter ended Jan. 31. For the same quarter last year, the company had a profit of $90.4 million, or $1.54 a share. Net sales fell 37.1 percent to $118.4 million from $188.2 million last year while retail sales dropped to $67.3 million from $85 million.
“Credit is the vascular system of the diamond industry,” said chairman and chief executive officer Robert Gannicott. “Its rapid decline last October shocked the diamond supply chain to a sudden standstill that persisted into this year.” The firm’s response, he noted, has been to reduce capital spending and operating costs “without jeopardizing the future of our production and sales platforms.
“We now see some tentative recovery in the diamond market, albeit from a reduced base compared to six months ago,” he said.
Last month, in a move that allowed the firm to pay down its mining segment debt, Kinross said it would invest $150 million for a direct stake in Harry Winston and an indirect interest in its minority holdings in the Diavik diamond mine.
For the year, net income slid 34.1 percent to $70.1 million, or $1.15 a share, from $106.4 million, or $1.81 a share, last year. Revenue slid 10.3 percent to $609.2 million from $679.3 million, as net sales in the retail segment grew 5.8 percent to $281 million from $265.5 million.
Excluding the effect of inventories on hand prior to the acquisition of the retail operation, gross margin in the retail segment declined to 49.4 percent of sales in 2008 from 50.3 percent in the prior year, reflecting a reduction in higher-margin sales in Japan, among other factors.
Strong sales in the Middle East, Russia and the rest of Asia helped offset weakness in Japan.