Leading Edge Group Jewellers (LEGJ), which has fallen to the smallest of the four groups, issued a media release on 12 December announcing the departure of its CEO; however, what the company did not detail at the time was its enormous losses over the past two years.
It was only a few years ago that LEGJ was one of the jewellery industry’s most exciting prospects; in 2018, the group could boast 135 members accounting for 195 stores.
Today, the group represents 21 members and 21 jewellery stores; however, the more concerning issue is that the latest financial report paints an even more troubling picture.
In documents lodged with the Australian Securities and Investments Commission (ASIC) on 30 June, Riverwise Pty. Limited – the parent company of LEGJ – reported a consolidated loss of more than $5 million for the financial year.
The report also detailed a loss of nearly $4 million in the 2022 financial year.
This means that in just two years, LEGJ has lost just shy of $10 million. Additionally, the financial reports lodged with ASIC indicate a stock level of $1.77 million – at cost, down from $2.08 million in 2022.
If the majority of this ‘inventory’ is jewellery - and the previous year’s sales equate to $380,000 - then LEGJ holds 4.5 years' worth of stock.
Buying groups
This information came to light during the research phase of the 2024 State of the Industry Report (SOIR).
The six-month study revealed that with only 21 members - a decline of 84 per cent since 2018 - LEGJ is firmly the smallest of Australia’s four buying groups, and the declines noted in similar studies in 2022 and 2020 show no signs of slowing.
Nationwide Jewellers (299 members) is Australia’s largest group by membership, followed by Showcase Jewellers (134 members) and Independent Jewellers Collective (69 members).
When Jeweller contacted chief operations officer Charlie Davey as part of the research for the SOIR, he was uncooperative.
He claimed that the company could not easily distinguish between a paid buying group member and a retailer that had purchased a product from LEGJ’s new jewellery wholesaling divisions.
Davey stated that LEGJ had 70 members with 101 stores; however, when questioned, he dismissed Jeweller's method of defining a buying group member as “complex”.
He would not confirm LEGJ’s actual membership figure (members pay $89 per month) despite the group’s cooperation with similar reports over the past decade, unlike the other three, which were transparent and collaborative when providing their information as were the jewellery chain stores.
Jeweller subsequently obtained a recent membership list, which confirmed that LEGJ only had 21 members and 21 stores. The list included other businesses not classified as jewellery retailers by the SOIR definitions.
The company’s 2023 financial reports record a total of 411 members across its seven retail divisions, including jewellery.
Revolving Door
The company has experienced a revolving door in its management positions.
On 23 November, the current CEO of Leading Edge Retail, Lee Scott, contacted Jeweller concerning the SOIR following Davey’s inability to distinguish between its members (21) and stores that were not members.
Scott took issue with Jeweller’s approach to researching the topic: “We have a business model that has changed many times over the years to meet the change in the business verticals and members we support”.
Background reading: Leading Edge - What goes up must come down!
He was referring to the new supply (wholesale) division created by the parent company, including Troy Australia and The Diamond Republic and was attempting to suggest that retail customers of these jewellery companies - which LEGJ describes as ‘subscribers’ - should be included in the membership count.
Scott added, “If that doesn’t fit your view of the world, that’s OK, there is room for everyone and their opinions. But do not underestimate or understate our commitment to the jewellery industry and our members going forward and over the last 38 years.”
Interestingly, while criticising Jeweller’s definitions of a buying group member, it became obvious that Scott and Davey could not agree on their own figures.
Davey had initially claimed 70 ‘members’ (the figure included ‘subscribers’), while Scott later advised a figure of 86 jewellery businesses "in various membership models".
Jeweller maintains that a retail customer of LEGJ’s wholesale divisions is not a ‘member’ or a ‘subscriber’ in the same way that Pandora stockists are not ‘members’ or ‘subscribers’ to Pandora.
When presented with the data obtained by Jeweller from LEGJ’s own membership list, Scott finally conceded that there were only 21 members under the definition used for more than a decade.
In a baffling development, on 12 December, the group issued a press release announcing the resignation of Scott as CEO after only six months in the position. Davey was announced as his successor as of 31 December.
If that wasn’t intriguing enough, the release also detailed the formation of an ‘Executive Committee’ to support Davey during the transition. This committee includes Lee Scott, Simon Lane, and Graham Dear – all former CEOs of Leading Edge.
According to the statement, Scott is moving into ‘semi-retirement’. He was only appointed CEO in May, after the resignation of Lane for ‘personal reasons’. Lane’s name appears on ASIC records for the wholesale jewellery division, and he has remained a Leading Edge Group director since his resignation.
Dear was CEO for fewer than two years, stepping down from the position in 2018.
It’s a similar story at Riverwise, with the latest financial report detailing the resignation of directors Anthony Fleetwood and Paul Baker in April of this year. Those departures follow the resignation of David Mills and Donna McMaster in 2022.
The parent company has even changed its company secretary in the past 12 months, with Jon McArthur leaving in April and being replaced by Aaron Lane.
As previously reported, other factors point to the decline of LEGJ’s jewellery division and buying group.
For example, the Facebook page for ‘Leading Edge Group Jewellers’ has not been updated for two years. The last post on 23 December 2020 reads: "And on the last day of Christmas, my true love said to me "Which diamond does your heart desire?"
Ironically, the Facebook page states: “Leading Edge Group Jewellers is Australia's fastest growing & most cost effective independent jewellery group”. [Emphasis added]
With that said, the LEGJ website (legj.com.au) is non-functional. The site appears to have been taken down.
When Jeweller contacted Davey as the CEO-designate asking whether the jewellery inventory figure of $1.77 million was still accurate, he advised that he was unable to comment.
Note: The State of the Industry Report is a six month study of the Australian jewellery industry, the most extensive and comprehensive analysis to date. People wanting to obtain a copy of the 90-page report can apply here.
READ MORE
HOVER AND CLICK TO DOWNLOAD eMAG PDF
2024 State of the Industry Report: Facts, Figures, Fallacies & the Future |
More reading
Buying Groups: Musical Chairs
Leading Edge: What goes up must come down
Rising Stronger: Valuable Lessons From the Pandemic
Buying group embraces new jewellery-and-marketing supplier