NEW YORK — The sparkle should be back in 2004.

SARS, a worldwide travel slump and conflicts in the Middle East and other regions have made this year particularly challenging for the $43 billion fine jewelry and watch sector, but many executives are heading into the holiday season looking for an uptick. They feel the economy is showing signs of a rebound and consumers seem to be ready to buy luxury again. This should translate into a stronger-than-expected fourth quarter and trigger a trend that is likely to carry through 2004, executives said.

“For 2004, we think it’s realistic to expect that we’ll be operating in a better environment than that of 2003, which was characterized by events such as the war and SARS,” Bulgari chief executive officer Francesco Trapani said recently.

Executives have reason to feel confident about their category. Fine jewelry and watches have gained in prominence on the red carpet and designer runway shows, and trends such as turquoise and chandelier earrings have generated much buzz and heightened consumer interest in the category.

“Next year, I expect the interest in jewelry to increase,” said Stanislas de Quercize, president and ceo of Cartier. “There’s more confidence in the economy, positive thinking and people are reacting to creativity.”

Next month, Cartier plans a nationwide rollout of its new Les Delices de Goa collection, which was launched at the Fifth Avenue flagship here, Beverly Hills, Chicago and Bal Harbor and Palm Beach in Florida last month. The Goa collection hones in on colored semiprecious stones such as amethyst, coral and turquoise, and is priced from $3,650 to $21,600. Cartier also plans a nationwide launch of its Panthere collection, which updates and reworks Cartier’s signature panther theme, and a new women’s version of the Roadster watch.

“[The U.S. market is] 35 percent of the worldwide wealth, 50 percent of the car consumption and only 15 percent of the worldwide watch and jewelry consumption,” said de Quercize. “Next year, we hope to convince more people [to buy jewelry and watches]. You see more jewelry on the cover of magazines.”

Before year’s end, Cartier is planning to open a store at the Americana Manhasset in Manhasset, N.Y., and renovate its Costa Mesa, Calif., boutique with the new store concept, which bowed in Paris earlier this year and features sandblasted oak walls, Art Deco-influenced bronze display cases and a crystal chandelier.Next year, Cartier will bring the new store concept to its Beverly Hills, Waikiki, Chicago and Bal Harbor boutiques.

Graff, meanwhile, is focusing on opening new stores. The high-end diamond jewelry firm has just opened its second U.S. store on Worth Avenue in Palm Beach, Fla., and has started construction on a two-story location on Oak Street in Chicago slated to open at the beginning of 2005.

“Palm Beach is a really strong market for high-end jewelry,” said Henri Barguirdjian, president of Graff in the U.S. “They still love big diamonds in Florida.”

Graff has also been expanding its wholesale business with Saks Fifth Avenue, a project that will continue into the new year. Graff last year began selling some of its diamond jewelry in the New York flagship and now its jewelry is sold in five Saks locations.

To facilitate its wholesale expansion, Graff has opened a new corporate headquarters on 48th Street in Manhattan, which also has a diamond cutting factory.

Barguirdjian said he is optimistic about business for 2004. Graff has been working to build its brand here via advertising and marketing, moves which Barguirdjian said seem to be resonating with consumers.

“People are very well educated about diamonds now, especially in America,” he said. “They are discriminating about where they shop and they want fine quality, and that is what Graff is known for.”

Daniel Lalonde, president and ceo at LVMH Watch & Jewelry North America, said, “At LVMH, we are looking at next year quite positively. If you look at the economic environment, it is more positive over the past few months.”

Last month, LVMH’s Tag Heuer division introduced a version of the signature Formula 1 collection, which is priced between $600 and $800, to provide an entry point for younger consumers, Lalonde said. Tag Heuer is also developing a line of classic watches based on the signature Carrera model, to be launched next year.

“Our strategy is to continue to grow with our current retailers and we are not interested in expanding the number of doors, but rather we want to go deeper,” Lalonde said. “We are very positive and we will be investing more into the brands. Our budgets are headed in the north direction. We are setting plans for double-digit growth.”Lalonde noted that service is a key component he is seeking to improve further next year.

“We have a large investment with consumers up to the time they buy a timepiece,” he said. “We want to make sure we have the Tag or Dior consumer living the brand experience after they make the purchase, so it is important to remain in a dialogue with them.”

Meanwhile, many smaller jewelry companies are planning to step up their distribution by looking at new distribution channels.

Designer Leslie Greene currently sells her jewelry to about 95 independent jewelers and 20 Saks Fifth Avenue stores. In 2004, she anticipates adding 20 new independent jewelers.

“I am increasing my advertising [budget] by probably about 40 percent, and I will advertise in more magazines and kiosks, and also do more in terms of public relations,” Greene said.

Paul Morelli, too, is looking to step up his presence in independent jewelry stores. The designer’s collection is currently sold in 15 independent jewelers and he plans to add 35 next year.

“Over the past 10 years, we have been mainly focused on fashion and specialty stores,” Morelli said. “We will continue to grow that. We had put the independent jewelry retailer on the back burner a little, but now we are getting more involved.”

Last month, Morelli opened a 2,000-square-foot appointment-only boutique in his hometown of Philadelphia and said he would like to open more stores, though he hasn’t confirmed any specific plans.

“The biggest challenge now is to come up with fresh new ideas,” Morelli said. “We came off of this big chandelier thing and it’s been maxed out. The new challenge is to find the next big thing.”

Janice Winter, president at Judith Ripka, said, “There is a lot more competition...there is pressure on value and price point, and as consumers start to see so many people coming into the market, they become more savvy. It becomes more important to differentiate yourself.”

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