Like the overall stock market, the jewelry industry recently enjoyed a few record-breaking years, which clearly benefited the handful of publicly traded jewelry companies.
But in the last few weeks, jewelry industry stocks have taken a tumble along with the rest of the market.
What’s striking is that just about all the publicly traded companies—including Signet Jewelers, Pandora, Brilliant Earth, Charles & Colvard, and Movado—reported solid results in their most recent quarters. And in most cases, their stock price is well above what it was pre-COVID-19.
But retail stocks have been slumping in general, and some worry jewelry can’t sustain its current high growth rates.
At the time of publication, Signet Jewelers’ stock was trading at $55.36 a share, down 25% from one month ago, when it traded at $81. Its 52-week high was $111.92.
Analyst Paul Zimnisky calls Signet “a value stock, so it was ‘cheap’ on a typical valuation basis even before the stock market sell-off.”
He notes it “generated a lot of cash flow last year, and they are using that to buy back stock this year,” which should help support the stock price.
Brilliant Earth, the jewelry company with the most recent IPO, is now trading at $3.87 a share, after its shares fell when it lowered guidance for the rest of 2022. The stock debuted at $12 a share, which was somewhat below expectations but still valued the company at more than $1 billion. Its 52-week high was $20.39, which it hit in December.
Zimnisky says that Brilliant Earth’s stock has both benefited and been hurt by recent market cycles.
“In this market, if you are a growth stock with a big multiple and you show any sign of weakness, you get crucified,” he adds. “Brilliant Earth is a good company, but the valuation was just too rich. They went public in the midst of the bubble last year.”
He adds the stock might be helped if the CEO or chief financial officer bought some shares, which would be seen as a vote of confidence.
“The CEOs of Starbucks, Spotify, and Shopify recently bought their stock after big sell-offs, and the stocks bounced,” he says.
He thinks that it could be a possible acquisition target, like its two main e-tail rivals—Blue Nile and R2Net, owner of James Allen—which were purchased by Bain Capital and Signet, respectively.
At publication time, charm maker Pandora was trading at $511 on the Nasdaq Copenhagen. Its 52-week high was $950.
Watchmaker Movado Group’s stock was valued at $32.20 a share at publication time, down from its 52-week high of $46.24.
Charles & Colvard, the moissanite company that has ventured into lab-grown diamonds, seemed to finally break through the $2 barrier last year, after spending a few years in the $1–$2 range. Last year, it hit a 52-week high of $3.32. But now it has sunk back down to $1.36 a share.
As far as the various lab-grown diamond companies and jewelry e-tailers thought to be considering IPOs, Zimnisky says that going public may be a “lot more difficult now than it was six months ago.”