• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Synthetic Gem-Maker Charles & Colvard's Stock Price Triples Since January

Posted on: Sunday, 17 July 2005, 21:00 CDT

Jul. 17--MORRISVILLE -- The stock price of Charles & Colvard has tripled since January. For a little perspective: That's three times what tech darling Google has gained. Next week, C&C plans to report its 18th consecutive profitable quarter. And Wall Street analysts, who just last year paid scant attention to the synthetic gem maker, have come a calling.

Investors say the 10-year-old company has only begun to tap into its potential.

"If sales are this good with about 5 percent of women aware of it, and you extract what sales could be if 50 percent knew ... all of a sudden that is what really lights people's eyes up," said Irv Frankel of Chestnut Hill, Mass., who owns 10,000 shares with his 17-year-old son.

Stephen Shipman, portfolio manager with Bjurman Barry Fund in Los Angeles, which manages about 125,000 shares of Charles & Colvard, agrees. "As long as we see that [growth], we'll stay with it."

There is plenty of untapped market, said Robert Thomas, 57, C&C's chief executive and president, and the man many credit with the company's success.

The worldwide wholesale polished stone market is about $30 billion a year, Thomas said Thursday at the company's headquarters, just a few miles from Raleigh-Durham International Airport. Pointing to figures he scribbled on a conference room white board, Thomas said his goal is to capture at least 1 percent, or $300 million. "I've got to be a dummy not to be able to do that," he said.

Last year, Charles & Colvard's revenue totaled $24 million. Thomas said sales this year already have topped $20 million.

Much of that increase came from J.C. Penney, the first major retailer to carry the company's moissanite jewelry. Moissanite is a nearly colorless gemstone made from silicon carbide, the third-hardest substance known to exist. Diamond, made of carbon, is the hardest. Moissanite, which sells for about one-tenth the price of diamonds, has more fire or sparkle than a diamond and therefore more brilliance -- a key selling point for many.

In October, J.C. Penney placed moissanite in 462 of its stores. Sales were so strong that it added the jewels to 241 more, virtually all of its stores.

"I would call moissanite one of the most successful categories that I recall in a long time," said Beryl Raff, senior vice president and general merchandise manager for fine jewelry at J.C. Penney. "It's very rare that a brand-new business category that has no overlap or cannibalism of other business comes onto the horizon. Usually something will come along to replace something similar. This was really a new category."

Charles & Colvard's journey to this point has been similar to that of the jewelry it creates. The lab-created moissanite starts out as a clunky, brownish cube before being cut and polished into a clear sparkling gemstone.

Thomas said when he was named acting chief executive in May 2000, the company was bleeding money. A $6 million marketing campaign aimed at new customers had failed because of weak distribution channels. Total operating losses had mounted to more than $20 million. And the company was falling short of its projections. In a desperate attempt to save the company, major shareholders, including Thomas, agreed to pony up $6 million to help keep the doors open. "My wife and I invested an additional $1 million," said Thomas.

With that, Thomas got busy trying to revive the struggling company. First, he changed its high-tech name, C3, to the more retail-friendly Charles & Colvard. Then he cut the payroll from about 80 workers to about 40. For those who remained, he instituted employee incentives, including profit-sharing bonuses.

The payoff came quickly. Charles & Colvard turned its first profit in the first quarter of 2001 and has remained profitable ever since. In May 2001, Thomas was named CEO and president. He now wields even greater power as its largest shareholder, chairman of the board and chief executive.

After stabilizing the company, Thomas turned his attention to management.

He hired Jim Braun as his chief financial officer. Then he tapped two people with deep ties to the jewelry-marketing industry: Dennis Reed, who became executive vice president and chief marketing officer, and Barbara Mooty, who is vice president of brand development and industry relations. Soon after, moissanite jewelry was featured on TV shows such as "CSI,""The West Wing" and "Sex and the City."

Thomas also brokered deals with three jewelry suppliers, Rio Grande, Stuller Inc. and K&G Creations. Together they sell Moissanite to about 5,000 retail jewelers, Thomas said.

Over the years, Charles & Colvard has continued to invest heavily in marketing and sales in an effort to educate consumers about moissanite. On average, Thomas said it spends about 30 percent to 35 percent of revenue on marketing.

Its target market has been professional women: A recent ad reads: "Moissanite, A classic tale of beauty and brains."

Lynette Robbins, a Boston, Mass.-based entrepreneur who was checking on her Raleigh office, is one of those women. "I get more compliments on my moissanite ring than I do my diamonds," said Robbins, who had stopped in at Impressa Classic Jewelry in Crabtree Valley Mall to order a four-carat moissanite stone for her wedding band. She plans to transfer the band's three-carat moissanite (an earlier purchase that replaced the band's emerald) to another ring.

Robbins likes that people thinks it's a real diamond. "They say 'I love your diamond.' I smile and say 'Thank you.' "

Steve Boole, owner of Impressa, said that reaction is typical. "Charles & Colvard doesn't market it as a diamond, but many women are passing it off as one."

Boole has been selling moissanite for nearly five years -- starting with about a dozen pieces at his stores in The Streets at Southpoint, Crabtree Valley Mall and Four Seasons Town Centre in Greensboro. "Now I have about 70 pieces in each store," he said.

Raleigh jewel distributor Andy McCord, has had similar success selling moissanite, which makes up about 90 percent of his business. Five years ago, he sold the gems to two companies. Now, he sells to 50. McCord estimates his annual sales will move beyond six figures in the next two years.

People's opinion about moissanite has also changed since Thomas took over the company. Instead of writing it off as fly-by-night company, jewelry experts now say Charles & Colvard its carving out a permanent niche in the jewelry industry.

With a market capitalization of $385 million, stock analysts are starting to take serious notice, said Braun, Charles & Colvard's CFO. For now, analysts aren't writing about the company's stock performance, which would give it broader exposure to investors. But that may change as sales and trading activity increase, he said.

"They used to tell us reasons they couldn't give us coverage," he said. "Now we seem to have taken away a lot of those reasons."

-----

To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com.

Copyright (c) 2005, The News & Observer, Raleigh, N.C.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

CTHR, JCP,

Source: The News & Observer

More News in this Category