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March Sales Weak, LGD Revenue Issues Continue

April 10, 2024 /

Increasing interest rates and energy costs led consumers to reduce their expenses at jewelry shops. In March, sales of finished jewelry and loose diamonds were down 3%, and the average expenditure per unit decreased 3.5% year over year.

Lab-grown diamonds – loose and finished jewelry – are facing significant challenges. The increase in the number of units sold is not enough anymore. Retailers are experiencing a decrease in their revenue from LGD and that will lead them to seek alternatives – if they haven’t already.

On a more personal note, after months of intensive work, Tenoris made a significant update to its system. This includes more than doubling the number of retailers providing us with data, enhancing our database, and updating our reports.

Details on that are at the end of the market report.

Finished Jewelry Sales Flat

March was a steady month for finished jewelry with unit sales up 0.3% and total retail sales practically flat (-0.2%). The growth in unit sales was driven by gains in items under $750 while value was bolstered by the high end and all price points over $20,000.

Retailer margins remained flat at 51%. The average retail sales price declined slightly, down 0.5% to $1,080.

Results for the first quarter of the year show the market down 0.4% in units and up 0.7% in retail sales value.

March natural diamond jewelry sales were down 3.4% in units and 2.4% in retails sales value. Increases in bracelets and necklaces were not enough to offset declines in earrings and rings. The first quarter closed with Natural sales down 3% in units and 1% by value. The sales share of jewelry set with natural diamonds stood at 91%, a 3.4% decrease year over year.

March LGD diamond jewelry sales were up 41.4% in units and 25% in retail sales value. Retailer margin stands at 59%, up 5.8% year over year. The average retail sales price is down 11.7% year over year to $2,077. First quarter sales for LGD jewelry are up 43.6% in units with retail sales value up 26%.

Lab Grown Engagement Rings

There has been much discussion regarding the increasing margins for lab grown diamonds, both loose and set. The average margin for an LGD engagement ring in March was 59.5%.

The continued rise is due to retailers capturing more of the reduction in LGD wholesale costs. However, the increased margin has been married to a continued decline in the average sales price.

Over the last two years, the average sales price of an LGD engagement ring has declined 28% from $4,148 to $2,974. This downward price movement has had a significant impact on retailers’ gross margin.

The average retail gross margin of LGD engagement rings has declined 17.5% in the two years to March of 2024. The trend line indicates that this erosion shows no sign of abating.

LGD Set Engagement Rings Gross Profit & Margin

LGD Set Engagement Rings Gross Profit & Margin - underlying LGD revenue. Source: Tenoris.bi data

Natural Diamond Engagement Rings

The retail margin for natural set engagement rings has remained essentially flat over the last two years, averaging 46.3%. There has been price erosion as the average retail price has declined 8% from $4,074 to $3,768. The impact on retailer gross margin is detailed in the following graph.

Natural Diamond Engagement Rings Gross Profit & Margin Trend

Average gross profit and margin of natural diamond engagement rings Jan 2022-Mar 2024. Source: Tenoris.bi

The average retail gross margin of LGD Engagement Rings has declined 4.8% during the two-year period to March 2024.

The two charts are revealing from a Gross Profit perspective.

  1. Retailers realized higher average gross margins from the sales of LGD engagement rings from March of 2022 through the fourth quarter of 2023.
  2. Due to the continued decline of average retail price for LGD rings, the resulting gross profit from their sales is now less than natural diamond engagement rings.
  3. This trend shows no slowing.

During this same time period, the unit share of LGD engagement rings has increased from 10% in March 2022 to 21% in March 2024.

The current trajectory is of increasing unit share of an item with declining gross profit. Any belief that a finished piece of jewelry could exist outside the cost dynamics of loose LGD diamonds is not supportable.

Data continues to support the need for stability in the profitability of LGD goods at the immediate risk of declining industry profitability.

Diamond Sales Sluggish

Sluggish demand in March led to a decline in retailers’ revenue from loose diamond sales, despite a small rise in the number of units sold. By units, sales were up 2% and by value down 13% in March.

Overall, US consumers spent 15% less per item, primarily reflecting lower prices and no traditional occasions to buy bridal jewelry.

Natural Diamond Sales Fell Hard in March

In March, natural diamond sales were back to double-digit year-over-year declines. By value, sales declined 15.6% and by number of units sold sales declined 13%.

Consumers expenditure per unit also declined, down 2.7% compared with March 2023. At the same time, spending per unit is still relatively high, averaging $9,455 in March, much higher than the $6,500-7,000 spent pre-COVID.

The average retail price of one carat rounds declined 14% year over year and two-carats declined 16%.

Sales fell the most in the Southwest, down 47%, and the least in the Midwest, down 4%.

The decline in consumer demand had a small impact on retailers. The number of loose natural diamonds they kept on hand increased just 1.5% in March.

US Natural Diamond Sales Trend

US loose natural diamond sales chart - Jan 2020-Mar 2024 - Source: Tenoris

LGD Revenue Keeps Shrinking Despite Ongoing Rise in Unit Sales

In what is now evidently a trend, revenue from loose lab-grown diamond sales declined for the fourth consecutive month. In March, retail sales of loose LG fell to $2,743, declining 5.6% year over year.

Year over year revenue decrease began in December 2023. The decline takes place despite a rise in unit sales, which increased 18% in March. Retail prices are falling faster and deeper than unit sales are rising. In March, the average unit price of LG was down 20% year over year.

This should be an alarming trend for the LG sector. For retailers, this means they need to either increase unit sales at a faster pace or reduce LG sales in their sales mix.

Loose LGD Sales Revenue YoY Is Shrinking

Retailers' loose LGD Revenue are Shrinking year over year

The price declines are primarily driven by the larger key sizes. Retail prices of one and two carat round LGDs fell 2% in the last month. Year over year, they crashed 30% and 29%, respectively.

The growth in lab grown unit sales continues, however this growth is also under pressure. In March, loose LG sales rose 22.6% year over year, below the 27% rise in the first quarter.

The easing consumer demand may have surprised retailers. Retailers’ inventory levels of The of loose LGs increased in March, up 14% compared to February.

As discussed above in the context of finished jewelry, the lab grown sector needs to figure out their path forward. As the figures and trends outlined here show, consumer demand is not enough. It’s also about cash through the register. With less income, retailers suffering from eroding profitability will direct their customers to other products.

Tenoris Updates its Dataset and Everything Else

Tenoris has been busy updating its systems over the past few months. It began by expanding the number of retailers in our panel by 135%. Their combined sales in 2023 were $3.91 billion.

Currently our jewelry and gemstone sales data represent 5% of total US jewelry sales and accounts for 9% of US specialty jewelers’ jewelry sales. In statistics-speak, by value this brings our margin of error to 2% at a confidence level of 99%.

We also expanded the ways data can be viewed, updated the reports, and moved to a new database. In short, we are excited and tired.

About Tenoris

Tenoris collects retail sales data from a broad representative sample of US jewelry retailers. Tenoris subscribers include retailers, manufacturers, miners, and financial firms. They use this data to study everything from broad market trends to price prediction, assisting them in identifying changing trends and opportunities ahead of their competitors.

Tenoris can help improve your business through a better understanding of the US jewelry market. Contact us to discover how our reports provide comprehensive insights of the US jewelry market and how you can gain access to this data.

Photo: Marcus Reubenstein

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