Without a holiday or special occasions, April is traditionally a slow month for diamond and jewelry sales. Yet seasonality aside, it was a difficult month. Despite an impressive start of the year, jewelry sales are declining and fell below 2021 levels in April.
Diamond sales did not fare much better. Sales of natural diamonds declined year over year, and lab-grown diamonds are experiencing a certain change in their growth trend.
There is a talk about the industry having a year for the ages in 2021. The interesting thing is that the boom times did not end with the calendar year. Fine jewelry sales stayed at historically elevated levels through April of 2022. This makes for a difficult year over year report for April 2023.
A high-level look at April 2023
Total fine jewelry sales were down 17.8% year over year.
Natural diamond jewelry sales were down 19.3% year over year.
There were sharp declines in total value at every retail price point range.
Under $1,000 – down 17.1%,
$1,000 to $4,999 – down 14.2%,
$10,000 to $19,999 – down 15.2%,
$20,000 to $99,999 – down 24.9%,
Items over $100,000 – down 58.3%.
Breaking down sales by major categories shows a similar picture: sales of bridal jewelry declined 17.6% and fashion jewelry fell 17.6% year over year.
Lab-grown diamond jewelry sales posted a 28% year-over-year increase. However, this follows much better year over year increases in the first three months of the year: lab-grown diamond jewelry sales were up 72.1% in January, 54.2% in February, and 37.2% in March 2023.
Not A “Career Year” Anymore
In the sports world the term “Career Year” is used to describe that one-time anomaly where an athlete performs well above expected levels. Those athletes, no matter how great the rest of their career may be, are often asked why they cannot repeat that one special year.
April 2022 was the end of the industry’s career year.
The industry will now be comparing performance against a less exuberant market. What should our expectations be? There is no doubt that it is a different market today than in early 2022:
- The engagement bubble is over. Bridal jewelry, excluding loose diamonds, represents 20.2% of specialty jewelers’ sales. We do not foresee it rising back to 2021-2022 levels.
- Purchases of high-cost items are winding down, which will impact the highly volatile over $100,000 segment. This past April had a 2.2% share of sales, down from 4.3% in April 2022.
- Diamond jewelry sales in the key $2,500-$5,000 price range are constantly declining since the start of the year, something that will likely dominate the rest of the year until the November-December holiday season.
- The under $1,000 market is suffering from the impact of high inflation and economic uncertainty.
These are areas of softness that will remain in the market until external conditions improve and will drive down year over year expectations.
On the plus side, we can use a quick look back at April 2021 to see some stability against the pre-hyperactive market.
- Specialty jewelers’ sales in the $1,000-$9,999 price range in April 2023 were flat compared to April 2021.
- Sales in the $10,000-$19,999 price ranges were up 7.7%.
- Overall fashion jewelry sales were down only 1.4% versus April 2021.
Taken together, we should expect to see a tempering of the year-over-year sales figures. Our expectation is to see these declines settle into mid to upper-single digit declines. Mother’s Day sales will be a crucial test to see that the numbers are no worse than this projection.
Diamond Sales Declined
Polished diamond sales are experiencing a slowdown, yes, lab-grown diamond sales have a fresh sales trend. Prices are also taking on a new direction.
Natural Diamonds: Higher Prices Despite Declining Sales
Prices of natural diamonds rose overall in April. And yet, this did not offer the kind of relief diamond traders or retailers were seeking in the last few months.
In some specific size ranges retail prices and wholesale costs had downward movement was noted. Overall, retailers’ costs were up 2.8% month over month. However, they paid less for 1.90 caraters, as well as for items in the 2.75-2.99 carat range. At the same time, average retail prices leaped 8.6% month over month, mainly due to an increase in the average size of sold natural diamonds.
The news that requires attention is that the number of diamonds sold, and total value of sales have completed a year of year-over-year declines. Retailer gross margins, which climbed through most of 2022, have declined every month in 2023.
Consumer demand for larger goods, specifically in the 1 to 4 carats range, rose in April. This led to a double digit increase in the number of units sold month over month.
Ovals continue to capture share of sales. In April, one of every five natural diamonds sold was oval.
In a further sign of diamond wholesaler pressure to move goods, the supply of memo goods is widening. After several years of memo goods maintaining a share of about 18% goods sold, in 2023 to date they are up to 22.6%.
Inventory levels of loose remains fairly steady since the start of the year.
Lab-Grown Diamonds: Average Sales Price Rising
For the second month in a row, the average retail price of all sold lab-grown diamonds rose month over month. In April, the average retail price increased 1.8% month over month.
There were two primary drivers for the higher average price. One is the continual increase in the average size of purchased diamonds. The other driver was purchases of better color and clarity stones.
Average size grew from 1.86 carats In March to 1.90 carats in April. This may seem like a marginal increase, but in April 2022 the average size was 1.53 carats. This is an ongoing trend.
The improvement in color and clarity combinations are slower. A year ago, FG colors and VS clarities were the most sought-after items. Last month that solidified on F/VS1. Despite the speed, the change has an impact on generated sales, especially in the short term.
Unit sales were up 41% year-over-year in April, a slowdown from March. Basically, we have witnessed a deceleration in year-over-year growth since the start of the year. Already a trend, this may signify that LGD growth has passed the initial growth sprout of a newly adopted fresh product, and the start of a maturing process characterized by a slower growth rate.
By value, sales increased 13% year over year. Again, a deceleration trend since January for the same reason above, plus the constant price declines.
Also of note:
The average per carat retail price of lab-grown diamonds rose month over month, but compared to April 2022, they declined 12.8%.
Retailer’s gross margin continued increasing and reached 58.4% in April, up 13% year over year.
Lab-grown diamond inventory levels were near flat, down 0.6%.
The two points to pay attention to in lab-grown diamonds are the slowing sales growth and consumer’s willingness to buy higher priced items. They seem contradictory trends but may signal a profound change in demand: The quick adoption phase is receding among those that want to spend less, but growing among an older, more sophisticated consumer base willing to spend more.
Tenoris Diamond & Jewelry Reports Update
We added two new filters to the reports, each of them provides a whole new layer of understanding of market trends. The first, Region, allows examining trends in specific US broad regions: East, Midwest, Southeast, Southwest, and West.
The other new filter is Retailer Average Transaction Value (ATV). In Retailer ATV, we took retailers’ total sales and divided them by number of units sold. This measure, commonly used in public company reporting, allows looking at data through the aspect of retailer positioning: Low cost, price point, mid-range, and high-end.
We found the two new selects eye-opening, adding depth to the data and revealing finer trends. Please play around with them, they are important tools when considering launching new products, revealing differences in purchases and sales, which goods different retailers focus on, and more. We hope you find they provide you with a deeper understanding of the retail market.
In addition, we performed several small system tweaks over the past several months. Most are a refinement of several graphs and tables and other minor improvements.
More functionality and features are on their way. Thanks to all those that provided us with feedback and helped improve these unique services.
If you want to better understand the US jewelry retail landscape, contact us for a deeper and comprehensive understanding of the market and how Tenoris can help improve your business.