Harry Winston Diamond Corp.’s retail segment more than doubled its fourth-quarter operating loss despite a pickup in demand.
A $4.9 million increase in the cost of sales pulled down profitability, lowering gross margin to 44.1 percent of sales from 49 percent.
Chairman and chief executive officer Robert Gannicott said on the company call Thursday that retail sales have rallied in the first quarter and that, excluding Japan, Asian sales have climbed to 18 percent of the total from 5 percent in 2007.
In the period ended Jan. 31, Harry Winston’s retail unit recorded an operating loss of $4.7 million versus a loss of $2 million a year earlier. Net sales in the division rose 3.3 percent to $70.2 million from $67.3 million last year. In the U.S., revenue grew 40 percent to $26.2 million, while European sales dropped 45 percent to $17.1 million. Sales in Asia jumped 52 percent to $26.9 million.
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Gannicott said after coming off “positive momentum from the holiday season,” sales in the luxury jewelry markets are expected to strengthen during the year, as U.S. and European markets regain their footing and emerging markets and Asia continue to grow.
Overall, the Toronto-based company, which also has diamond mining operations, reduced its quarterly net loss to $3.4 million, or 4 cents a diluted share. The adjusted loss of 1 cent a share beat the 3 cent loss expected by analysts polled by Yahoo Finance. The year-ago net loss was $93.8 million, or $1.53 a share, and included asset impairment charges and numerous other onetime items.
Sales grew 12.9 percent to $133.7 million, from $118.4 million. Gross margin as a percentage of sales fell to 28 percent versus 41.8 percent for the prior-year quarter.
For the year, Harry Winston swung to a loss of $73.2 million, or 99 cents a diluted share, from a profit of $70.1 million, or $1.15 a share in 2008. Revenues sank 32.2 percent to $412.9 million from $609.2 million. In retail, the firm widened its operating loss to $15.7 million from $2.5 million. Annual sales fell 19.9 percent to $225 million, from $281 million.