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Lucara revises FY 2022 revenue, sales, production guidance upwards

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“As a purist and old school diamantaire, I don't believe in LGD,” says Vin Lee, CEO Grand Metropolitan

01 november 2021

vin_lee_xxz.pngVin Lee, the King of Luxury, doesn’t need any introduction. He is a self-made billionaire CEO of Grand Metropolitan. The Beverly Hills' family office Grand Metropolitan is $7 billion AUM privately-held luxury goods holding company with a 60-brand portfolio.

The Group specializes in distressed debt assets of luxury brands. Finlay Fine Jewelers is one of the largest private jeweler groups in North America. Heilig-Meyers is also one of the largest private furniture retailers in the United States.

Grand Metropolitan also owns Pushkin Caviar, Gallery Rodeo, The Beverly Hills Cigar Club, and Beverly Hills Sports Car; participate in charity auctions, celebrity events, and red-carpet functions including the Cannes Film Festival, Oscars, Grammys, Emmys, and Independent Spirit Awards, and many more.

Vin Lee spends his time between Gulf Coast, Florida & Southern California. 

In this exclusive interview with Rough&Polished, Vin Lee is his original self … mirroring the US jewellery market for you with elan!

Media reports indicate that jewelry sales in the US spiked up in September growing 55 per cent y-o-y compared to last year. But again, jewelry spending reportedly rose only 57% versus 2019. What growth do you expect for the year 2021 and beyond?

We shut down all retail sales operations on March 13, 2019, with full pay and benefits. I was not about to risk losing any talent for what was supposed to be a two-week pause. So, we did see a 70% decrease in overall sales as a result of missing the holiday season in 2019. By far…our busiest quarter in both wholesale and retail. That shut down was extended into 2020 due to both political and governmental pressures globally and nationally. Competitors such as Signet Jewelers (Jared, Kay, and Zales) became very elastic during this period. Shutting down 300 locations permanently… while investing heavily in online operations, and acquisitions. Following their lead, we were able to add both Samuels Jewelers (Samuels, Schubachs, Rogers, and Andrews Jewelers) as well as high jewelry Bailey, Banks, and Biddle to our portfolios.

So, while the overall industry lost many operators in the jewelry space both retail and wholesale, consumer spending was carved to the bone for in-person shopping. This led to enormous growth online and the strengthening of established legacy jewelers in social media and consumer confidence in buying online. This is a position we have been preparing for the last decade. The conversion to the digital landscape and new economy accelerated during COVID 19. Fewer brands are now sharing an increasingly large piece of the pie in the segmented jewelry market.

More jewelry businesses including large chains closed lower in Q2 2021 than Q2 2020 in the US. Besides closure, many businesses were involved in sales/mergers compared with last year, but very few bankruptcies in the second quarter. Do you see the US market returning to its former status soon?

Both Finlay Enterprises and Signet Jewelers have successfully split up the largest retail jewelry chains in the United States over the last several years with Signet capturing Zales most recently. This has culminated in a consolidation of more than 20% of the entire fine jewelry market in America. Many of the brands in our competitive portfolios were mall-based retailers. Consumers would often rotate from a selection of a dozen different locations on one property for their purchases all owned by the same few operators.

Finlay also supplied over $1 billion wholesale in annual sales through the majority of department store jewelry retail counters who were considered anchors and major tenants at these malls. Returning Finlay to its former glory we also sell under 40 different retail banners as well making it the largest privately held jewelry group in North America. While Signet is the largest diamond retailer in the world with a footprint of more than a dozen brands across 3,000 locations worldwide.

This is an overwhelming shift in the landscape of our industry. I do not see an immediate return of thousands of local independent jewelers to the market for many years. The credit markets are entirely too tight and suppliers who have survived have had to cut off more generous terms to their softer accounts as they are also being squeezed.

Too many institutions such as Wells Fargo and GE Capital have had significant losses due to the implosion of the industry which also brought forth the actions of people like Nirav Modi and $2 billion in monies from India's banking community.

New York retailers, especially supply chains, are said to be in trouble. However, according to analysts, especially major chains like Signet Jewelers are doing pretty well and forging ahead. Your views?

We have followed the efforts of Signet Jewelers and their talented leadership helmed by Virginia Drosos with great interest. Prior to the pandemic Signet was struggling with the $1.4 billion acquisition of Zales and $300 million for JamesAllen.com contributing to $600 million in losses as well as a shareholder lawsuit judgement of $240 million for covering up sexual harassment. All of this caused an image problem in retaining talent and shareholder enthusiasm. What had been a $10 billion enterprise slide to a stock price in the $6s and a valuation of about $500 million during COVID-19.

In my opinion, I believe the push for lab-grown diamonds in the marketplace during the same period caused a lot of confusion for the consumer and a reluctance to embrace this new product as independents began to aggressively talk up this alternative to natural diamonds.

Fortunately for Signet, they were quick to enact a program allowing their staff to work from home and online. They followed the consumers spending habits right to their living room and on their couch and were able to generate $1.2 billion in online sales during that term.

In this regard, the pandemic may have saved Signet Jewelers while hundreds and thousands of smaller competitors didn't have the brand or social media footprint to provide the same level of customer service. Signet stock has since climbed to $91 near its 5 years high and close to a $5 billion valuation. This renewal has enabled them to purchase Diamonds Direct for $500 million. The moonshot the Signet stock has taken has created great wealth for those that believed in managements aggressive transition to a digital platform in the way we have been operating at Finlay Enterprises.

Currently, which category of jewelry --- luxury high-end pieces or more affordable items/entry-level --- jewelry brands selling well in the US? Your opinion?

That is a bit of a trick question actually. Finlay Enterprises just like Signet Jewelers, operates on all levels of the spectrum. Although our Bailey Banks & Biddle Group is more along the lines of Bvlgari or Cartier featuring high jewellery and luxury branded items similar to Tiffany & Company. But our portfolio brands like Samuels compete in the same category as Signet's Zales.

The higher margin and thus more profitable jewelry categories are haute couture or high jewellery. But of course, you will find the high sales volumes the lower you go on the price point scale. That is why operators like Amazon and Walmart sell consistently more gold and diamonds than the majority of the industry at large.

At this point in time in history, I believe the United States market to be best suited for the consumer in the middle. Obviously, we have our Rodeo Drive and Palm Beaches to cater as well. As one of the largest privately held luxury groups in North America we manage a $10 billion portfolio unlike Paris' Louis Vuitton - Moet Hennessey LVMH (Tiffany & Co) who dominates the planet at $400 billion with Kering (Gucci) and Richemont (Cartier) coming in at a colossal $100 billion each. You will find luxury achieving great influence in Europe, Asia, and the Middle East than North America.

Though fine jewellery and watch industries may face tough conditions in the next few years, some market watchers see significant opportunities for players in this sector. Will the interest in ‘watches for engagement’ boost growth in this sector going forward?

When I first came across this trend, I was very intrigued. Watch manufacturers have for decades been trying to find a "hook" or purpose for consumers to transact with their brand in light of every single person on the planet having a phone/clock/calculator/compass etc. on them at all times.

I remember many insisting that Steve Jobs was going to kill the watch industry with the iwatch. Companies like Fitbit have made billions in the smartwatch marketplace, and yet Rolex, Patek, and Tag still continue to generate along with dozens of other labels.

What I have noticed is that it has not become a matter of ditching the Audemars when your loved one gives you an Apple iwatch for a gift. Most people simply have turned to their other wrist for the technology. So, when this campaign emerged as Watches for Engagement, I did a quick informal "polling" on my personal social media about its effectiveness. When asked which they preferred between a watch and a ring, most said BOTH. While a surprising amount concluded that a watch was in fact the ideal form of engagement token.

I honestly believe that the large retailers and watch brands need to compose an international media campaign promoting this to the masses in the way that DeBeers "A Diamond is Forever" dominated the social structure for since the last century. Jewelers need more than "fake" diamonds as a way to get consumer traffic up after COVID-19. The industry has been in a slump for decades, the pandemic really just sounded the death knell for those on the edge. We need to speak to today's consumer and their needs.

Globally, Gen Z has turned pro-LGDs/jewellery, more so in the US. What are your views on this trend?

I have been very vocal on this subject. As a purist and old-school diamantaire, I don't believe in LGD. I say this as one of the first ones to be introduced to the industry in the 1990s. I have a home in Sarasota, Florida where I was introduced to retired Brigadier General Carter Clark who brought back the technology from Russia during the cold war and raised the funds and facilities in South Florida to start Gemesis. I saw the first carats out of the box.

I have also been close friends with their President, Lisa Bissell who renamed the company Pure Grown Diamonds in 2014. Charles & Colvard have been hocking Moissanite for almost three decades. This isn't really a new concept. In order to sell LGDs, you have to trash out the benefits of natural diamonds. The net of all this noise is it will encourage people to buy colored stones which we have seen a spike in growth consecutively over several years.

Media reports say De Beers is bringing back its ‘A Diamond Is Forever’ Ads. Will this help the natural diamond sector grow further, given the current competition from other luxury sectors?

I grew up with DeBeers and was heavily influenced by that campaign. The industry as a whole does need a message it can get behind and I would be in full support of rebranding "A Diamond is Forever". I would be interested in learning the positioning since DeBeers has branded retail stores and their own products during this time. There was confusion with the consumer when they would walk into a showroom and ask for a DeBeers diamond. At the time, no such product existed, and they didn't understand the "Got Milk" type of marketing DeBeers was supporting for the entire diamond industry.

Finlay Enterprises began its only branding efforts in 2010 under the Romanov banner. As a result of our tour of Russia on the eve of ALROSAs IPO, we felt that North America deserved a clear alternative to the South African product managed through the DeBeers pipeline.

Wrapping up, how is Finlay Fine Jewelers faring now? Any expansion plans in the jewellery sector on the horizon?

Finlay has done very well throughout this term. We have no debt service and a tight grip on our overhead. We have been very fortunate to not have lost any one of our corporate family to COVID-19. The landscape of the North American jewelry industry is larger than ever with fewer participants. With the majority of our portfolio of national and regional brands, many of which have over a century relationship with their communities, we are well-positioned on both brick and mortar and digital platforms.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished