Charles & Colvard Reports 35% Decline in Net Sales, Net Loss of $2.13 Million

Charles & Colvard, Ltd. reported a significant decline in financial performance for the three months ended September 30, 2024, with net sales totaling $3.23 million, down 35% from $4.95 million in the same period last year. The decrease was attributed to weakened consumer confidence amid economic uncertainties, inflation, and rising interest rates, which adversely affected demand for both moissanite jewels and finished jewelry. Sales of finished jewelry accounted for 92% of total net sales, dropping to $2.96 million from $4.30 million, while loose jewel sales fell 59% to $270,000.

The company's total costs and expenses also decreased, amounting to $5.37 million compared to $7.58 million in the prior year, primarily due to reduced sales and marketing expenses, which fell by 31% to $1.88 million. General and administrative expenses decreased by 32% to $1.26 million. Despite these reductions, the company reported a net loss of $2.13 million, slightly improved from a loss of $2.54 million in the previous year. The loss per share was $0.68, compared to $0.83 in the same quarter of 2023.

Operationally, Charles & Colvard's inventory levels decreased, with total inventories at $23.33 million as of September 30, 2024, down from $24.93 million at the end of June 2024. The company’s cash and cash equivalents also declined to $2.74 million from $4.14 million. The company continues to face challenges, including a substantial doubt about its ability to continue as a going concern, as indicated by its management. The company is exploring financing options and cost-saving measures to address these concerns.

In terms of strategic developments, Charles & Colvard launched a direct-to-wholesaler sales portal in May 2023, aimed at enhancing its distribution capabilities. However, the company has not repurchased any shares during the reported quarter, maintaining its focus on liquidity. The company’s reliance on a single supplier for silicon carbide crystals remains a critical risk, especially following a recent arbitration settlement with Wolfspeed, which requires a payment of $4.77 million.

Looking ahead, Charles & Colvard's management is focused on improving operational execution and increasing consumer acceptance of its products. The company is also evaluating its financing arrangements and considering inventory liquidation if necessary. The outlook remains cautious, with management acknowledging the potential for continued volatility in sales due to external economic factors and competitive pressures in the jewelry market.