January 11, 2013 3:29 pm

All that glisters is not gold

‘Affordable’ jewellers come out on top at Christmas

Diamonds are a girl’s best friend, but this Christmas it looks like she had to make do with something more “affordable”. Jewellers and watchmakers have been releasing their end of year numbers and the lower end of the market has come out on top. Signet, which owns high street chains Ernest Jones and H Samuel in the UK and Kay in the US, said that fourth-quarter earnings would be at the upper end of expectations, an improvement of 15 per cent on the previous year. Smaller US rival Zale also reported decent numbers.

Life was tougher on the other side of town, though. Tiffany’s full-year earnings will be 5 per cent below last year after a disappointing festive season, while UK-based Theo Fennell warned on profits. Swiss watch group Swatch sat in the middle – news that sales of its watches and jewellery rose 16 per cent in 2012 was tempered by comments that, in China, mid-range brands have been selling better than its top end names, which include Omega.

But all is not lost for swanky jewellers. Data from the Swiss watch industry, for example, shows that demand for timepieces worth more than SFr3,000 increased more than 5 per cent in November. And although Richemont – owner of Cartier and Piaget – has yet to report on Christmas, its earnings are expected to rise 26 per cent for the year.

Shares in the luxury part of the sector are already priced for great things. Richemont, Tiffany and Swatch all trade on around 18 times forecast earnings. Asian growth and high margins have been powerful incentives to buy their shares. But any blip in trading, and there’s a long way down. Signet, meanwhile, is on a more reasonable 14 times while Zale carries a similar rating for 2014 earnings. Gift buyers aspiring to give diamonds next year should put their money somewhere more “affordable” in the meantime.

Email the Lex team in confidence at lex@ft.com

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