Taking control of the De Beers Diamond Jewellers (DBDJ) retail operation from LVMH has completed De Beers transformation from a mining company into a diamond luxury group.
The acquisition means that not only is De Beers effectively spread across the entire diamond pipeline now, but it also has full control of its name, which the retail business was unable to leverage.
The partnership between De Beers and LVMH was, essentially, a failed one. DBDJ produced consistent losses; its most recently available report showed a net loss of $13.2 million in 2015 – largely due to high costs and operating expenses – even though sales rose 3 percent to $161.3 million that year.
Initially, at least, that reality will weigh on De Beers as the company takes responsibility for running the retail chain. Before, LVMH managed the operation, with De Beers taking a share of the profit – or, more accurately, incurring its losses.
In the new structure, from an accounting perspective, DBDJ will likely be treated the same way as other De Beers subsidiaries – Element Six, Forevermark and the International Institute for Diamond Grading (IIDGR).
In its financials, De Beers separates its rough diamond sales – its core business, which totaled $5.6 billion in 2016 – from “other sales,” which refers to the combined contribution of its subsidiaries. DBDJ would then give those other sales – which amounted to about $500 million last year – a $160 million-plus annual boost.
However, the decision to buy the retail business undoubtedly extended well beyond the financials.