Helzberg Diamonds CEO says you 'cannot tell a difference' between lab grown and natural diamonds

Brad, it’s really great to see you. Great to see you. So let’s talk a little bit about how the consumer is feeling. We we’ve heard from Jay Powell this week that the economy is looking good and overall I think the consumer is feeling healthy, but that doesn’t tell the whole picture. There are certainly areas where the consumer is kind of tapped out. What are you, what are you seeing right now? I mean, I think the consumer is definitely showing some resilience. I think consumer confidence has remained high despite all the indicators in the economy that might say otherwise. But there are beginning I think to be some pressures on consumers. I think the inflationary environment is taking a little toll, especially at the lower income levels across our customer base. I think we see some price pressure, very price sensitive, discount sensitive, especially in the lower income groupings. So we are seeing a little bit pressure on average ticket. So we’re seeing healthy shopping trends. Fortunately jewelry resonates even in tough times. People still get engaged and still have big milestones in their lives. So I would say it’s kind of mixed. I mean we’re a little bit cautious as we look to the balance of the year with so much uncertainty in the global environment and in the US of the election year, you know who knows what, what will happen. So we’re being a little cautious as we look forward. But overall, our business is doing pretty well and the consumer is, is kind of hanging in there. When the consumer feels some of those pricing pressures, do they trade down and do they trade down for things like engagement rings or do they just trade down for the other gifts that they’re buying? We’re seeing trading down kind of across the board. We’re not seeing that so much I would say at our higher income customers, but at lower income for sure. It’s kind of interesting in our business there is some deflationary pressure right now in the engagement space because of the market dynamics with lab grown diamonds. Oh yeah, so that’s a contributor a little bit I think to the the downward trend, but people are definitely buying down kind of across the board. So a lab grown diamond, can you tell the difference? If you don’t have like a jeweller’s, you absolutely cannot tell the difference. Chemically they are identical to natural diamonds. They’re just grown above the ground with amazing technology and craft and natural diamonds are grown under the ground. So but they’re both beautiful and unique and amazing products, but they’re cheaper. For lab grown ones they are cheaper and I think that’s resonating really well with consumers right now. You get a real diamond, you get an amazing look for a for a price that’s a little easier on the budget, which is really resonating well in this environment. We’ve seen great adoption from our customers and the lab grown space first in engagement and now we’re beginning to see the same trends in fashion as well. Have you are your margins any different for lab grown versus mining or you know it’s a cheaper diamond to begin with, so you have the same margin margin, That’s an interesting question. Margin is actually a little better in the lab grown space. So that’s been a big, a big thing for the industry. Yes. So it’s a good thing all the way around. Yeah. Are there still, are there social issues concerning the mining of diamonds that that people look at too? You know, I think there are some social issues on diamond. There’s a lot happening in the industry to make the the mining responsible and same on the lab burn side. Actually we’re beginning to work with our suppliers to make more and more of the lab burn diamonds sustainably produced. It does consume a lot of energy to grow a lot of diamond, but we are working with suppliers who are using renewable energy sources to do that and we’re actually, we just rolled out a line of engagement rings that is the first certified sustainable line in the US The Diamond is certified from beginning to end and set in recycled gold. It’s a beautiful product. What what do you see just in terms of how people shop after COVID, you all closed a lot of stores. What was it, 20% of your stores that were in malls, what what was happening? So you know, we actually took advantage of COVID to restructure the business. It gave us an opportunity I think to step back and look at our real estate portfolio and that restructuring actually enables us to come out of the pandemic stronger than we went in. So we have a great set of stores and we’re investing heavily in e-commerce because that’s a trend that obviously picked up during COVID and has stayed. So we’re seeing a lot of growth there in the future. You’re only in malls now that you want to be in top tier malls. Is that the key? Yeah, that’s the key. Are you going to expand those stores anywhere or is the plan just the stores you have? And digital? Yeah, I think right now we’re focused on growing productivity of the stores we have and investing in digital. There’s a lot of opportunity in digital, both for customers who buy online and then also digitally. Enables sales inside the store where customers want something that’s not in our case or they want to design their own custom piece of jewellery. There’s lots of opportunities to enable those experiences digitally as well that we’re investing in. That’s how you increase the store’s productivity. Let somebody come in and design their own stuff. Yeah, or I want this in a different colour or I want this in a three carat instead of A2 carat, right. All the all the different combinations that customers have, we like to make a special unique piece for them and and those are all experiences that we’re building and investing in for our customers. Part of this weekend, the Berkshire weekend is bringing together all the managers at Berkshire and I know that you all have a series of events where you get together. What what does that opportunity mean for you? What does it bring? It’s an amazing opportunity. You know, Berkshire is really unique and that we have this ownership culture where the subsidiaries, you know are are empowered to act as owners and we run our businesses, but we also have this amazing family of companies to reach out to for best practices and even collaborations. We have a really fun Mother’s Day collaboration going on with Sees Candy right now, which is another one of the great consumer brands in the Berkshire portfolio. So it’s really this really just amazing resource to have all of these these other managers to talk with to share best practices and network and get to know them and and we do leverage those relationships during the year as well. You’ve you’ve been the head now for a little over 2 years, about a year and a half. So OK, so this is your second go around for Berkshire. What did you learn last year that surprised you? I, you know, I think what surprised me was just the I had forgotten the experience of being here and how much excitement there is just to be around all the other managers and to be able to to interact with Warren. And of course we didn’t know it was Charlie’s last one. So this, this one will be unique and special, I’m sure in a lot of ways, but it’s just a great experience. There’s nothing like it.