How to Invest in Rising Jewelry Sales

Jewelry sales in the U.S. are up as Americans feel a little more confident in spending on some bling.The World Gold Council says gold jewelry sales in the U.S. were up 2 percent in the third quarter from the previous year, building on gains seen in the past several years."It has shown signs of progress for several quarters, although the gains have been small but steady," says Krishan Gopaul, market intelligence analyst at the World Gold Council in London. He says the rise in gold jewelry sales could be a sign of pent-up demand as Americans held off buying jewelry following the Great Recession.MasterCard SpendingPulse data shows total jewelry sales up 1.1 percent in 2015, with middle market sales up 4.5 percent. Its data reports on U.S. retail sales across all payments types.Sarah Quinlan, senior vice president of market insights for New York City-based MasterCard Advisors, says jewelry sales have been positive for 32 consecutive months, aside from a blip related to Easter timing this year. "That's a tremendous run. Unlike many categories, which consumers associate with superfluous stuff, jewelry has been popular with the new, experience-driven consumer," she says.Jewelry purchases are a last-minute gift idea, Quinlan says. "We see this as sales shoot up Christmas Eve and in the days prior to Christmas, and we also see that trend the day before Valentine's Day and the day before Mother's Day. It was always my suspicion that men waited until the last minute to shop, but now we see the data bears that out. Very funny," she says.An improved economy helps jewelry sales. Pat O'Hare, chief market analyst at Briefing.com, a Chicago-based research firm, says the steady growth in jewelry demand "is probably a reflection of consumers being in better shape," thanks to rising home prices, a strong stock market, the improved labor market and lower gas prices."Those factors all bode well. On top of it, you have a really strong dollar right now making it more affordable for U.S. buyers to buy gold and things of that nature," O'Hare says.The stronger dollar pushed down the price of most commodities, including gold and diamonds, which are denominated in dollars.Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott, a full-service wealth management, financial services and investment banking firm, says consumers have improved their balance sheets since the financial crisis.With U.S. jobs data starting to show wage growth rising, "all of that is encouraging for the consumer discretionary sector," Luschini says.But O'Hare and Luschini say consumers are being more disciplined with their spending, with certain areas of the sector doing well, like auto sales and electronics, but other areas like apparel lagging. Jewelry seems to fall into the former category, they say.Not all jewelry companies share the wealth. With Americans seemingly willing to open their wallets for baubles, investors may think that all publicly traded jewelry stores are worth a buy. Not so fast.Share prices for some of the luxury jewelry stores, such as Tiffany & Co. (ticker: TIF), Signet Jewelers (SIG), owner of Kay and Zales, and Blue Nile (NILE) are lower for the year, as are watch makers Movado Group (MOV) and Fossil Group (FOSL).O'Hare says that might be a sign of how the U.S. economy is faring compared with the global economy. "It certainly looks that way, by way of the disparate stock performances," he says.While down, SIG and NILE are doing better than Tiffany. O'Hare says 84 percent of Signet's sales on a trailing 12-month basis is U.S.-based, with Blue Nile's sales around 83 percent. Meanwhile, Tiffany derives about 55 percent of its sales outside of the U.S., and its stock is down 32 percent so far this year.Forty-five percent of Movado's sales come from outside the U.S., and its sales are down 6 percent for the year to date. Fossil receives 55 percent of its sales outside the U.S., and its share price is down 67 percent year to date.The stronger U.S. dollar is hurting stores like Tiffany, Movado and Fossil overseas, O'Hare says, as it makes these goods more expensive. Further, the stronger dollar is keeping some tourists at home, so stores like Tiffany get hit there, too."Where Tiffany gets hurt, and we heard this from Macy's, too, is the lack of international tourists. Tiffany has flagship stories in New York and Chicago; it's more expensive for foreigners to come visit the U.S. these days," he says.Demographics play a role in jewelry sales. Quinlan says the MasterCard SpendingPulse data shows that while middle market jewelry growth is up, the very top tier of jewelry has seen weaker growth.Luschini and O'Hare say the strength in Signet and Blue Nile may represent their demographic, which the middle-class consumer. "Middle ground jewelry stores clearly are seeing the benefit of having a little [more] disposable income as a consequence of the sturdiness of the job market and lower gas prices," Luschini says.Steven Singer, owner of Steven Singer Jewelers in Philadelphia, says sales at his store are up, and this is one of the best years it's had. But he attributes it to embracing how consumers shop now, reaching them through catalogs, a website, mobile applications or the physical store. "All the basics, bridal jewelry, [diamond] studs, tennis bracelets, are all doing well. But people are more price-conscious," he says.John Person, president of NationalFutures.com, says selling goods online is definitely helping a firm like Blue Nile. "Blue Nile is an example of what their customer base represents. Someone shopping online, looking for a deal," he says.The holiday shopping season will likely help all jewelers. The Gold Council's Gopaul says jewelry demand in the U.S. traditionally peaks in the fourth quarter.Debbie Carlson has more than 20 years experience as a journalist and has had bylines in Barron's, The Wall Street Journal, the Chicago Tribune, The Guardian, and other publications.