Editor’s Note
**Editor’s Note:** De Beers’ 40% price cut on rough diamonds marks a pivotal shift in the industry, driven by the rising demand for lab-grown alternatives. This move underscores the growing pressure on traditional diamond markets to adapt.
De Beers, the global diamond giant, has slashed rough diamond prices by approximately 40% over the past year as lab-grown diamonds gain popularity for engagement rings. The company, which had previously been reluctant to lower prices to defend market value, has taken this step as a last resort.
According to Bloomberg on September 3 (local time), De Beers reduced the price of ‘select makeables’ diamonds by about 40% over the past year. The price per carat fell from $1,400 in July last year to $850 in July this year. The select grade products are relatively high in value. The jewelry industry considers this price change unusual given De Beers’ historical reluctance to lower prices significantly.
The significant discount by De Beers is driven by expectations that supply prices may continue to decline. The company sells rough diamonds about ten times a year to intermediaries called ‘Sightholders’. These intermediaries then sell the rough stones to jewelry manufacturers, but in this secondary trading stage, prices are falling further, prompting De Beers to lower its supply prices as well.
A key factor pressuring rough diamond prices is the rapid expansion of consumer preference for lab-grown diamonds. In the United States, 1-2 carat diamond rings have been popular for proposals and engagements, representing the largest demand segment. However, consumers in this segment are price-sensitive, and lab-grown diamonds have successfully targeted this niche. In India, the world’s largest diamond processing center, lab-grown diamonds accounted for 6% of total exports this year, up sharply from 1% five years ago. Investment firm Liberum Capital Markets estimates that in terms of volume, lab-grown diamonds may already account for 25-35% of the market, considering the higher price of natural diamonds. De Beers itself launched affordable lab-grown diamonds in 2018.
De Beers attributes the decline in diamond demand to macroeconomic conditions following the COVID-19 pandemic. Paul Rowley, De Beers’ head of trading, stated:
While acknowledging that lab-grown diamonds have impacted the natural diamond market, the company maintains that this factor carries less weight compared to global economic recession risks.
Amid the volatile rough stone market, Signet Jewelers, a jewelry retailer listed on the New York Stock Exchange (ticker: SIG), attracted investor attention by reporting better-than-expected results and raising its guidance. On September 1, the last trading day of the week, the company’s stock surged 4.85% to close at $78.62 per share. Although the stock recorded a -2.66% return over the past month, expectations of strong performance drew buying interest.
On August 31, the company reported adjusted earnings per share (EPS) of $1.55 for the second quarter of fiscal 2024 (May-July 2024), exceeding Wall Street expectations of $1.45. Revenue for the period was $1.6 billion, down 8.1% from the same period last year but higher than the Wall Street estimate of $1.58 billion.
The company raised its profit target for fiscal 2024. While maintaining its revenue target of $7.1-7.3 billion, Signet raised its EPS target to $9.55-10.14, up from the previous range of $9.49-10.09, exceeding the average Wall Street estimate of $9.42.
Virginia Drosos, CEO of Signet Jewelers, commented on the performance:
She added that most of the company’s revenue still comes from the wedding category, particularly bridal-related sales.
Signet Jewelers, headquartered in Bermuda, owns well-known jewelry retail brands including James Allen, Kay Jewelers, and Blue Nile. In July, the company acquired SJR National Repair, a watch and jewelry repair specialist, for approximately $60 million to expand its related business.