Higher expenses and costs chipped away at Harry Winston Diamond Corp.’s second-quarter net income, despite surging revenue at its retail division and robust rough diamond prices.
“Global retail demand, especially in the emerging economies such as China and India, has delivered both strong retail sales growth and strong rough diamond prices,” said Robert Gannicott, Harry Winston’s chairman and chief executive officer. “Seeing through the effect of a small number of high-value, lower-margin sales, our own jewelry and timepiece business shows solid growth in both sales and margin in the core bridal, timepiece and designed jewelry segments.”
The Toronto-based upscale jeweler said that for the period ended July 31, net income attributable to shareholders fell 21 percent to $10 million, or 12 cents a diluted share, compared with year-ago income of $13 million, or 17 cents. Earnings per share fell short of the 16 cents Wall Street expected.
Sales rose 44.7 percent to $222.4 million, from $153.7 million a year earlier. Selling, general and administrative expenses expanded 29.2 percent to $49.1 million during the quarter.
At the company’s retail division, which accounts for the bulk of the firm’s revenue, gross margin fell to 37.8 percent from 53.1 percent, driven mainly by the “mix of high-value jewelry sales that carry a lower-than-average gross margin,” the company said.
Retail sales expanded 98.5 percent to $132.8 million, from $66.9 million, a year earlier.
The ceo declined to give earnings predictions or forecast the near-term rough diamond market price increases. However, he said that the company expects to “continue to grow its jewelry and timepiece business despite challenging economic conditions in the U.S. and Europe.”