Harry Winston Diamond Corporation posted a 62 percent increase in revenue during its fiscal second quarter of 2011. Both the mining and retail segments posted strong gains. Mining operations generated revenue of $86.8 million, an increase of 89 percent, and retail sales rose 37 percent to $66.9 million. Harry Winston reported profit of $16.5 million, which was up from a loss of $24.5 million in second quarter of fiscal 2010.
Overall, Harry Winston improved gross margin as a percentage of sales to 43.5 percent, up from 30.1 percent. The company earned $3.3 million from foreign currency gains, whereas in second quarter one year ago they reported a loss of $25.3 million.
Rough diamond sales for the quarter rose due to a combination of a 62 percent increase in rough diamond prices and a 17 percent increase in volume of carats sold. Rough diamond production was 14 percent higher at 645,000 carats, but as measured by the calendar year. Harry Winston held three rough diamond sales during second quarter, one of which was a tender, compared to two in the comparable quarter of fiscal year 2010.
Cost of rough sales was $55.4 million, resulting in a gross margin of 36.2 percent compared with gross margin of 12.8 percent one year earlier. The higher cost of sales was due primarily to the cost of mining open pit synchronously with the high-cost development ore from underground mining at Diavik.
Luxury jeweler Harry Winston experienced a 40 percent increase in sales across Europe at $24.7 million. Asian sales increased 40 percent to $22.6 million and U.S. sales increased 31 percent to $19.6 million. The cost of sales for the retail segment for the second quarter was $31.4 million compared with $26.2 million. Gross margin for the quarter was $35.5 million or 53.1 percent compared with 46.3 percent. The increase in gross margin resulted primarily from a more balanced product mix in salon sales and a greater proportion of higher margin watch sales.
Robert Gannicott, Harry Winston chairman, said, "This quarter has demonstrated the continued recovery in the international diamond business and it has also shown additional improvement from our own business segments. Both mine production and rough diamond sales increased in parallel with the growth in retail sales from our network of international stores particularly at the high end. We expect further growth in retail sales supported by renewed marketing efforts as customers seek out true craftsmanship."
Along with its financial report issued today, Harry Winston announced the appointment of David Carey to its board. Carey currently serves as the president of Hearst Magazines. Prior to joining Hearst, Carey was group president at Condé Nast, where he served as a member of the company's executive committee and co-lead on all business development efforts, and in other positions at Condé Nast since 1995.
Source: Jeff Miller, Rapaport
