Middle East bucks the trend in worldwide drop in luxury products retail sales
Middle East, defying international drift, shows remarkable increase in watch & jewellery retail sales
Countering fears of a worldwide recession, international Watch & Jewellery companies report good sales in H1-2008, Q2-2008 or fiscal 2008
It is no secret that during the past several months, the regional and international media have been falling over each other to report extensively and unfailingly on the continuing global economic recession triggered by the US originated sub-prime mortgage crisis. The media coverage is largely dismal reflecting a doomsday scenario.
The news from the Middle East though is far more encouraging. Despite strong inflationary trends, the region has seen a big revival of its own financial fortunes thanks to the swelling of its coffers by surging oil revenues. The boom continues unabated even to the time of compilation of this report. It appears that at least for the present time, the good times are here to stay.
Heartening Economic Forecast: GCC oil & gas revenues to reach USD $ 562.0 billion
The region is riding the crest of great economic prosperity and high expectation. Oil producers and gas exporters in the Gulf Co-Operation Countries (GCC) are expected to earn a record USD $ 562.0 billion in 2008 as crude (& gas) prices are projected to remain over the USD $ 100 per barrel mark and they are pumping at one of their highest levels according to new data available.
Gas also remains a top revenue earner for the GCC states. Collectively, the top three GCC economies, Qatar, Saudi Arabia and the UAE will account for 81.0 % of the GCC gas supplied by 2012.
Economic and other geographical & socio-economic-political conditions have ensured that the price of oil stays at its current peaked levels and averting any plummeting of the same. This phenomenon has ensured that the good times in the oil & gas-rich, oil & gas-exporting GCC states continue to roll, enormously boosting their cash reserves and surpassing their wildest expectations.
The UAE’s income will swell to an all-time high of USD $ 97.0 billion while that of Kuwait and Qatar will peak at USD $ 89.0 billion and USD $ 32.0 billion respectively. Similarly, Saudi Arabia’s earnings in 2008 will be nearly 75.0 % higher than in 2007.
The following table demonstrates the projected earnings for the six-member GCC during 2008 and corresponding figures for 2005, 2006 and 2007:
(Figures in USD $ billion)
| Country | 2005 | 2006 | 2007 | 2008 |
| Saudi Arabia | 143 | 165 | 176 | 307 |
| UAE | 42 | 53 | 58 | 97 |
| Kuwait | 47 | 58 | 52 | 89 |
| Qatar | 13 | 17 | 19 | 32 |
| Oman | 13 | 15 | 17 | 29 |
| Bahrain | 3 | 5 | 6 | 8 |
| Total GCC | 261 | 313 | 328 | 562 |
Additionally, investment in the region is at an all-time high. Massive new infrastructure and economic projects involving tens of billions of US Dollars are continually being announced in the GCC states. Foreign Direct Investment (FDI) has peaked in the region and continues to grow phenomenally on a year-on-year basis. As a spin-off, there has also been an influx of professionals from all walks of life and from all over the world streaming into the region, attracted by both the demand and opportunities available.
The arrival of white-collar and top flight professionals has boosted buying power and this in turn has catalyzed retail growth in the region.
World Gold Council expects increased gold sales during Ramadan, Eid Al Fitr
Buoyed by cascading oil revenues, retailers of luxury lifestyle goods including gold, jewellery and high-end premium watches, are clearly encouraged. In fact, the World Gold Council recently announced through a Press communiqué that it expects increased sales of gold and gold jewellery through the Muslim Holy Month of Ramadan, scheduled to take place during the calendar month of September 2009.
The World Gold Council (WGC) Middle East Office expects the consumption and sales of gold among locals, expatriates and tourists to increase during Ramadan and the ensuing Eid Al Fitr holidays that mark its conclusion. “We observe that gold ales increases across the GCC far more substantially than at any other time of the year,” said Lama Al Saheb, PR & Project Manager, WGC, Middle East, Turkey & Pakistan. According to Lama, Europeans prefer 18-carat Italian gold, Arabs prefer 18 and 21-carat gold and Asians prefer 22 and 24-carat gold.
UAE gold sales soars 20.0 % in Q2-2008; Saudi Arabia & GCC gold sales also surge
Gold sales in the UAE recorded 20.0 % growth during Q2-2008 to touch USD $ 986.0 million, according to the World Gold Council Middle East Regional Office. The Council also added that gold sales value increased in Saudi Arabia by 14.0 % and another 2.0 % in other Gulf countries. Additionally, Egypt also witnessed a phenomenal 48.0 % growth in sales value and 10.0 % increase in gold demand during this period.
Dubai’s rough diamond trade touches USD $ 3.03 billion
A barometer of continuing economic, retail and trade confidence in the region is illustrated by the enormous growth of the rough diamond industry in the UAE in general and Dubai in particular.
The Dubai Diamond Exchange (DDE) has announced that Dubai’s total trade of rough diamonds by 36.0 % to reach USD 3.03 billion during H1-2008 over H1-2007. During this period, rough diamond imports to the UAE grew by 23.0 % to reach USD $ 1.15 billion from USD $ 937.0 million during H1-2007. This was mainly driven by high volumes imported from Angola (75.0 %) and a 138.0 % rise in imports from China.
Exports in H1-2008 rose by 44.0 % to reach a total of USD $ 1.88 billion from USD $ 1.3 billion during the same period in H1-2007. Over 87.0 % of Dubai’s rough diamond exports were to countries of the European Commission (EC) and India, while Dubai’s exports to China increased by 950.0 %.
Part II:
Not to be outdone is the performance of international watch and jewellery majors who have all reported increased earnings for Q2-2008, H1-2008 or the fiscal year 2008 and encouraging forecasts / announcement of expansion plans for the future.
We have compiled herewith a summary of reports from some of the established leaders:
Swatch Group posts strong sales growth, operating profit during H1-2008
Sales growth for the entire Swatch Group topped 13.8 % at constant exchange rates for H1-2008, according to a recent press communiqué released by the Biel/Bienne headquartered company. Specifically, the Watches & Jewellery segment registered an impressive growth of 17.7 % (at constant exchange rates) despite ongoing capacity bottlenecks and volatile exchange rates.
The Group also posted a 16.0 % increase in operating profit to Swiss Francs CHF 593.0 million despite negative currency effects and sharp rise in the price of raw materials and precious metals. The Group predicts that the global outlook for the second half of 2008 remains robust following the acquisition of the Rivoli Group in the Middle East (reported earlier) and the Hong Kong listed Chinese watch distributor Xin Yu Hengdeli.
Richemont posts sales increase in Q1 of its current 2008 fiscal year
According to a recently released interim management statement, sales for luxury goods company Richemont increased 13.0 % in actual exchange rates (20.0 % on a constant exchange rate basis) in the first three months of its current fiscal year (April—June 2008). Sales for its Jewellery Maison’s Group, which includes the Cartier and Van Cleef & Arpels brands, increased 16.0 % for that period from about USD $ 1.0 billion in Q1-2007 to USD $ 1.2 billion in Q1-2008.
Sales for Richemont’s watchmakers, which include such brands as A. Lange & Sohne, Baume & Mercier, IWC, Jaeger LeCoultre, Panerai, Piaget and Vacheron Constantin, increased 13.0 % for the period Q1-2008 from to about USD $ 658.0 million from USD $ 582.0 million in Q1-2007.
Watches & jewellery category tops LVMH’s 12.0 % sales increase in H1-2008
Watches & Jewellery was LVMH Moet Hennessy Louis Vuitton’s most successful category in H1-2008 with revenues up 15.0 %, the Paris-based company announced recently. Overall sales were approximately USD $ 12.0 billion for H1-2008, up 12.0 % over the over H1-2007. The company cited excellent performances in the Middle East & Asia, Europe and the United States. It may be recalled that in terms of product success, the company was notable for the acquisition of the Hublot brand in H1-2008.
TAG Heuer and Zenith saw sustained growth in the high-end classic watch collections with Christian Dior, Chaumet & Fred have added new creations during this period. De Beers also maintained the impetus with the addition of new stores. “Reassured by strong momentum in the first half of the year, the Group approaches the second half with confidence,” asserted LVMH Chairman and CEO Bernard Arnault.
Tiffany & Co. Q2-2008 sales up 11.0 %, exceeding expectations
Strong net sales growth for Tiffany & Co. led to a 11.0 % growth in the retailer’s worldwide net sales for Q2-2008 ending 31 July. The Middle East & Asia led the rally. Net sales totaled USD $ 732.4 million in the quarter. In the six-month period ending 31 July, net sales rose 11.0 % to USD $ 1.40 billion. “Tiffany & Co. global retail operations and strong, continued growth in Asia despite economic recession in other parts of the world should contribute to increasingly consistent and resilient long-term earnings growth,” said Michael Kowalski, the company’s Chairman & CEO.
Bvlgari Middle East sales rises 11.0 % in Q2-2008
Italian brand Bvlgari, the world’s third largest jeweller reported that its second-quarter 2008 net sales rose 11.0 % in the Middle East, bucking the international trend, which witnessed net income drop by 9.0 % and sales fall by 11.0 %. According to CEO Francesco Trapani, the company is now focused on the Middle East, the Far East and emerging markets such as Eastern Europe, Russia and China, which collectively account for 33.0 % of its sales. Jewellery sales in Asia during this period grew by 5.2 % over the corresponding period last year.
De Beers on expansion spree, to open 50 stores by end 2008
De Beers Group Managing Director Gareth Penny has told the ‘Wall Street Journal’ (WSJ) that the company plans to open 50 new retail stores worldwide by the end of the year. Penny told the WSJ that the move would make De Beers, whose stores are a joint venture with luxury with luxury giant LVMH Moet Hennessy Louis Vuitton, probably in the top five jewellery retailers in the world. De Beers currently has 12 stores in Europe, Asia and North America include Dubai in the Middle East.
Movado’s net sales up 5.0 % in fiscal 2008
Net sales for fiscal year 2008 at the Movado Group Inc. increased 5.0 % to USD $ 559.6 million compared to the fiscal year 2007, the company has announced. “Considering the challenging economic and retail environment in the United States, we are pleased with our overall performance,” Movado President & CEO Efraim Ginsberg said in a media release. Ginsberg attributed part of the company’s success to its diversified business model from both a geographical and brand portfolio perspective.
Damas Group: H1-2008 Report, a strong performance across the company’s business lines
Damas Limited, the Middle East integrated jewellery and watch retailer reported recently that the Group’s revenues grew by 33.7 % to USD $ 657.0 million (H1-2007 revenue USD $ 493.0 million) in spite of high gold prices.
Damas concentrated on maximizing the sales on core jewellery business which consists of gold jewellery, diamond jewellery, pearl jewellery and premium watches
Other highlights include:
- Gross profits rose by 71.4 % to USD $ 125.0 million (H1-2007: 73.0 million) and gross margins increased to 19.1 %
- Net profist jumped by 132.9 % to USD $ 45.0 million (H1-2007: USD $ 27.0 million)
Operational Highlights: The company opened a total of 42 new stores to bring the total as of June 2008 to 467. The company plans 11 new stores in the UAE including the first-stand alone Parmigiani and Links of London boutiques. 14 new stores will be opened in the GCC (not including UAE) and 17 new stores outside the GCC.
The company plans the use of the recently concluded IPO to expand organically and through strategic acquisitions.
Part III:
Christie’s International Middle East auction sales touches USD $ 39.0 million in H1-2008
Auctioneers have also been benefiting with rich pickings and windfall sales thanks to a boom of the art and booming watch & jewellery collectibles by connoisseurs and aficionados in the region.