00:00Oh, it's fantastic. So average ticket is up 15%.
00:03Unprecedented, really, 50% rise in the last year. It's doubled over the last two years.
00:08Just in the underlying commodity.
00:09Just in the underlying commodity. And silver and platinum, by the way, have gone up 70% in the last year.
00:14So pretty phenomenal run.
00:16Why is the average ticket, then, of the items you sell only up 15% when the price of gold is up 50% and silver and platinum are up 60% and 70%?
00:26Yeah, so the bulk of the asset value is really in the gemstones and diamonds.
00:30And lab-grown diamonds are driving the price of diamonds down.
00:33So there's an offset there that's greater than the value of gold.
00:36That's pretty amazing that it offsets it that much.
00:40But before we get to the lab-grown diamonds, I just want to stick to gold.
00:44What do you see as the drivers behind this?
00:48Uncertainty, political uncertainty, economic uncertainty, money printing.
00:52All three are alive and well and going to increase in the future.
00:55So I think people have really bought into that.
00:57And I think gold will continue to do well.
01:00Just historically, over the last 10 years, gold had appreciated 11% per annum.
01:05S&P is up 12%.
01:06So it's actually pretty close.
01:08Interestingly, over a 30-year period, there's zero correlation between the S&P and gold.
01:13So people are thinking about it as a hedge.
01:15And I think that's here to stay.
01:16And that will go to either gold or something like a Bitcoin.
01:20And over the next 10 years, I would imagine some of this run continues.
01:23Maybe not at a 50% pace, but it will do fine, I think.
01:26So when you go to the market to buy gold, against whom are you competing?
01:31Is it other jewelers?
01:35Indian savers?
01:38Other central banks?
01:40Who's buying it?
01:41Central banks are buying right now roughly 25% of the gold that's out there.
01:46You're competing against financial investors as well as jewelers predominantly.
01:50But surprisingly, the financial investors are a much bigger part than people would think.
01:55I was wondering about a piece of gold jewelry.
01:58If you don't have a gemstone in it, right?
02:01How much do you charge above and beyond just the weight, just the cost of the asset?
02:07So there's a few things that go into it.
02:09One is labor charge.
02:10Second is when you're crafting a piece, you lose a certain percentage of gold.
02:14So it can be anywhere between 15% upwards to double, depending on exactly what the piece is.
02:20And that will go up more if they're studded with gemstones or diamonds.
02:24And the gemstones, we have talked to you a lot about these lab-grown diamonds,
02:28this phenomenon that's really driven down the price.
02:31Has it driven down the price of natural diamonds as well?
02:34Yeah, so natural diamonds are down roughly 45% from their peak, which was March of 22.
02:38So pretty phenomenal.
02:39When all the other assets are doing really well, diamonds have struggled.
02:43Because lab-grown is a perfect alternative.
02:45And what's the adoption rate look like to you?
02:48Because I'm sure at the beginning, a lot of people were unsure about lab-grown diamonds,
02:52even though they can't tell the difference even under a loop, unless they're extreme experts, right?
02:56A lot of people still want the safety of something that they're told is natural.
03:04Is that lessening?
03:05Yeah, so this quarter, roughly 60% of engagement rings sold in the U.S. will have a lab-grown center.
03:11That was 2% back in 2018 when the FDC said a lab-grown diamond is a real diamond.
03:16You just have to disclose that it's lab-grown.
03:18So 2% to 60% really in seven years, pretty phenomenal growth.
03:22And we don't see that slowing.
03:23I think we get to 80% adoption in the next 10 years for this.
03:28What does this mean for other gemstones?
03:31I mean, can you grow lab-grown sapphires, emeralds, rubies?
03:35Yeah, absolutely.
03:36So that's been happening since the 1980s.
03:39I think the difference is what we're seeing.
03:42So we're agnostic to whether we sell natural lab and for gemstones and diamonds.
03:48You don't make a bigger markup on either one?
03:50The margin is slightly higher for lab-grown, but then the average ticket ends up being lower.
03:54So it's kind of an offset that way.
03:57What we're seeing on the color side is 75% of what we sell is natural, 25% is color, is lab.
04:03And I think the reason for it, there's just like a spiritual aspect to resonating with the piece itself that you see much more in emeralds, rubies, sapphires.
04:11All of them have inclusions, and the inclusions are what make it more human-like in nature, whereas lab-grown tends to be perfect.
04:17On the diamond side, the adoption curve is very different.
04:20So 60% plus is lab, 40% is natural.
04:24Well, because customers, they want a perfect diamond, but when it comes to a ruby or a sapphire or an emerald, they'd rather see a unique imperfection.
04:34Yeah.
04:34So we've been trained with this idea for diamonds that are deep, flawless, so essentially colorless and flawless is the singular idea of perfection.
04:40That doesn't exist in color.
04:42There's 50 different shades of emeralds, of greens, and you and I might like very different shades.
04:48So you might like a zombian emerald, deep forest green.
04:50I might like more of a Colombian shade, and that doesn't necessarily happen with diamonds.
04:55How's the business as we get into Hanukkah, closer to Christmas?
05:00What's it looking like relative to last year, let's say?
05:02It's fantastic.
05:02We're up over 30%.
05:04We're growing very quickly.
05:06The industry overall is up over 10% this year, so jewelry has had a phenomenal year.
05:11In fact, of all the luxury categories, jewelry is doing better than handbags and everything else.
05:15And I think it's partly driven by gold, and people feel like it's much more of an investment.
05:20than in years past.
05:22So we're seeing that hypergrowth right now.
Comments