Inflation has been good to the jewelry business, keeping Kay Corp.'s retail diamond and gold operations strong, and offsetting a downturn in the company's overseas trading operations, corporate officials said yesterday.
Because of that strenght the Alexandria-based corporation expects to break even in a flat third quarter of 1979, Vice President T. P. Smith told security analysts meeting in Washington Yesterday.
Smith would venture no projections for earnings for the international trade side of Kay's operations, but he said he expects the jewelry business to contribute about $1.75 a share to Kay Corp.'s 1979 earnings. compared to $1.20 a share in 1978.
"Inflation in the jewelry business is actually on our side," said Michael R. Lavington, executive vice president of the corporation and president of Kay Jewelers, Inc.
"It seems to be a psychological thing. In an inflationary climate, if the customer is going to buy something, he likes to buy something he thinks has inherent value, like diamonds or gold," Lavington said.
Customers in the corporation's Kay's and Black, Starr and Frost stores are "very conscious of the price of gold," he said.
Lavington also said the company's stores were selling retail merchandise based on a $275-to- $300-per-ounce price of gold and diamond prices that were approximately six months behind current prices.
The company, the third largest jewelery retail chain in the nation, bought large inventories of both diamonds and gold early in the year, Lavington said.
Corporate officals predicted major growth in both international trading and the retail jewelry business for Kay Corp. in the long run. "Our goal is to be in the United States very similar to the Japanese trading houses whose names are all familiar," Smith said.
Lavington said he expects 1978 jewelry revenue to be over $100 million for the first time in the corporation's history, compared with $88 million for 1978.
In the first nine months of 1979, to tal sales in the retail jewelry operation were up 25 percent and sales in the same stores that were open in 1978 were up by 13 percent, he said. However, he conceded that the 13 percent increase mainly meant keeping pace with inflation.