Cost of sales rose 90%...

Harry Winston Diamond Corporation sales rose 88 percent to $140.9 million during its third quarter of fiscal year 2011. Cost of sales rose 90 percent to $85.8 million, nonetheless profits rose to $4.7 million from a loss of $1.4 million one year ago.

The diamond mining and luxury retail company recorded third quarter consolidated net income attributable to shareholders of $3.9 million or 5-cents per share compared with a net loss of nil per share one year ago. Included in this consolidated net income figure was a net foreign exchange loss of $3 million primarily on future income tax liabilities compared with a net foreign exchange gain of $1.6 million in fiscal 2010.

Rough diamond sales for third fiscal quarter, which ended October 31, soared 192 percent to $60.7 million and earnings from mining operations rose to $8.3 million from a loss of $4.5 million. Retail sales rose 49 percent to $80.2 million and earnings from operations rose to $5.4 million from a loss of $455,000.

The increase in rough diamond sales resulted primarily from a 182 percent increase in volume of carats sold. Rough diamond prices showed continued strength this quarter, increasing approximately 20 percent from one year ago. Rough diamond production was 115 percent higher than the comparable calendar quarter. Harry Winston held two rough diamond sales in the third quarter compared with only one in third quarter of fiscal year 2010.

Harry Winston reported that retail sales during the third quarter in the U.S. rose 76 percent to $22.6 million, European sales increased 56 percent to $32.6 million and Asian sales increased 23 percent to $25 million. With the approach of Christmas season, the retail segment anticipates increased demand for luxury products.

Harry Winston's global distribution network positions the retail segment well to benefit from the increasing mobility of high-end luxury consumers, the company noted. Harry Winston expects the rate of sales growth for the retail segment for the fiscal year to be in the range of 35 percent to 40 percent. In November the company launched a new advertising campaign further supporting the development of the brand. While costs associated with these advertising initiatives will impact operating margin in the fiscal fourth quarter, the company anticipates that the retail segment will generate an operating profit for the quarter.

Robert Gannicott, chairman of Harry Winston, said, "Diamond demand in the Far East continues to propel rough diamond prices as the Diavik mine transitions to underground production. Marketing efforts and store openings are successfully burnishing the Harry Winston brand to capture the branded luxury appetites of the emerging wealth of the newly developing parts of the world."

By: Jeff Miller

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