Birks Turns a Profit After Restructuring, Sees Shine in ...

Montreal-based jeweler Birks has emerged from restructuring to turn a profit in its latest fiscal year as the retailer refreshed its store network and saw increased sales of luxury watches and jewelry.Sales in the high end are still growing, Jean-Christophe Bdos, chief executive officer of Birks Group Inc. said Tuesday after the company reported improved annual results for fiscal 2016, ended March 26. Whats happening in the market is a big polarization. The high-end market keeps growing, and the entry price point, affordable luxury, is growing as well. What is a challenge at the moment is in between.The 137-year-old retailers strategy to increase and improve its assortment of high-end jewelry and watch brands including Cartier, Van Cleef & Arpels, Breitling, Frederique Constant and Messika has paid off, he said, fuelling same-store sales growth. We have had significant growth with Van Cleef and Cartier.Birks own private label collections target the affordable luxury end of the spectrum. Its in-house 18K gold collection of rings, pendants, earrings, and bracelets, for example, retails for between $1,000 and $7,000.Still, the overall industry remains under pressure.Birks, which operates 46 luxury jewelry stores in Canada and in Florida and Georgia under the Mayors brand, closed two stores in Canada last fiscal year after closing two in the U.S. and two in Canada in fiscal 2015.We decided to concentrate our efforts on stores with significant profitability those that generated negative or small returns we didnt keep, Bdos said.(Restructuring) is the case for many players in the retail industry, he added. The infrastructure has to be as light and slim and adaptable as possible in order to be successful.In addition to closing stores, Birks has worked to pare costs and improve its operating efficiency through new systems.In fiscal 2016 the company posted net profit of US$5.4 million, or 30 cents US per share, compared with a net loss of US$8.6 million, or (48 cents US) in fiscal 2015.During fiscal 2016, the company took a US$800,000 charge associated with an operational restructuring plan launched a year earlier in fiscal 2015, when it took a US$2.6 million charge. The company also recorded a US$3.2 million gain in 2016 for the sale of its corporate sales division.Excluding the 2016 charge and the gain, Birks posted net income of US$3 million, or US17 cents per share, compared with a net loss of US$3.1 million (US17 cents per share) in fiscal 2015.Same-store sales, a key retail metric that tallies volume at locations open for more than a year, rose three per cent in constant currency compared with fiscal 2015.Net sales fell to US$285.8 million for fiscal 2016 from US$301.6 million in 2015 due to a weaker Canadian dollar. Excluding currency factors, sales rose US$4.4 million in fiscal 2016 on a constant currency basis.The news comes as Birks and other jewelers grapple with a changing marketplace, spurred by a rise in online luxury jewelry sales.While the online fine jewelry market accounts for just four to five per cent of global jewelry sales, according to Dublin-based firm Research and Markets, it is growing quickly and is expected to capture 10 per cent of the market by 2020.I see online sales as a complement to the business rather than a threat to bricks and mortar stores, Bdos said.Birks is working to expand its online presence from a current two per cent of overall revenue as it concurrently works to improve stores, and has renovated about one third of its store network with the remainder to be completed over the next two to three years.The company also wants to grow through the launch of a wholesale division, and is in talks to open Birks branded shop-in-shops inside of other specialty retailers after a successful pilot run at its own Mayors stores in recent years.It looks promising, Bdos said of the discussions. It is tough in retail right now, but we believe there are growth opportunities there. Birks shares, which trade on the New York Stock Exchange, were up more than 580 per cent to US$3.66 at mid-day.