Harry Winston delivers upbeat trading update

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Retail sales up but rough diamond division faces difficult time.

Watch and jewellery sales at diamond specialist Harry Winston have risen in the first two months of the third quarter, according to the brand.

In a trading update the jewellery and watch brand said that sales in the US and Japan were particularly high, with China now representing a growing and significant percentage of its overall business.

Harry Winston said that sales of product sectors that it had run advertising campaigns for – its Midnight watches, bridal jewellery and design-led jewellery – had performed well, and that it was continuing to make sales of its high jewellery.

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The diamond specialist also reported healthy business at its mining arm. It said that the mining business is “modestly ahead” of its production plan while joint venture cash calls have been below budget and joint operating costs have been reduced by 11% for the first two months of the quarter.

Harry Winston has approximately US$112 million (£71.6m) of rough diamond inventory at June sales prices. Prices of polished round diamonds, which make up the bulk of diamonds used in the brand’s watches and jewellery, peaked in July having risen 25% in the year to that point, but since then the price have dropped 10%.

The company said that diamond price fluctuations have not been uniform, adding that fancy shapes have ot declined in price at all. It added that over the period rough diamond prices rose 50% but are now correcting against polished prices.

Harry Winston said that while it is not reducing or closing any of its polishing facilities, this division has been hit by the stress of the European sovereign debt issues and they are not investing in increasing this sector. It said that this has been reflected in the processing industry selling polished and reducing rough prices to increase liquidity even as jewellery retail continues to rise on last year’s figures.

Harry Winston chairman and chief executive Robert Gannicott said: “The credit crisis of 2008/9 was centred on consumer credit and the banks that were supporting it. This had a dramatic effect on the consumer. The current crisis is centred on sovereign debt and the largely European banks that are its holders, while consumer off-take remains resilient.

“Although we continue to make small sales of specific rough diamond assortments to specialist clients, we have elected not to make broader rough diamond sales into an unstable market that seeks bargains. As a result, significant rough sales revenues from this period will be deferred into the fourth quarter, and possibly subsequent periods. This time of the year is traditionally quiet in the rough diamond market being the Jewish and Indian holiday periods. We expect a return to normality in November as demand increases in the lead-up to the Christmas, Indian wedding and Chinese New Year seasons.”

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