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RAPAPORT... Signet Jewelers reported that sales rose 39.3 percent year on year to $1.23 billion during the second quarter that ended on August 2, which was the first reporting cycle following the acquisition of Zale Corporation in May. Excluding Zale's contribution of $247.5 million in sales during the period, Signet's increase was still strong at 11.2 percent. Cost of sales increased 43.2 percent to $816.9 million. Profit fell 13.9 percent to $58 million or 73 cents per share. Same-store sales company wide rose 4.8 percent, however, there were noticeable differences by brand. Kay's same-store sales jumped 8.1 percent, while Jared's improved 4.9 percent. H.Samuel's comparable-store sales rose 2.6 percent and Ernest Jones' rose 6.4 percent, both reflecting solid growth in the U.K. Meanwhile, Zale Jewelers' comparable-store sales fell 1 percent, Gordon's Jewelers' dropped 5.7 percent, Peoples Jewellers' rose 3.9 percent and Mappins' declined 4.3 percent. Zale Canada's same-store sales improved 2.5 percent. The retailer observed strong U.S. consumer demand for bridal brands, fashion diamonds and watches at its Sterling Jewelers division, with the average transaction price up 4.6 percent. In the U.K., sales growth was driven by a strategic marketing initiative to improve diamond sales, coupled with higher consumer demand for watches, but the average transaction price fell 0.9 percent. At Zale, the strongest categories were branded bridal and fashion jewelry. Signet's inventory level at the close of the quarter totaled $2.35 billion, up 65.4 percent year on year, with the acquisition of Zale accounting for $841.3 million in goods. The company's Sterling Jewelers division added $61.2 million in inventory during the period, primarily in bridal and fashion brands. Signet's diamond sourcing initiative added $8.1 million in inventory. The group's U.K. division increased inventory level by $17 million; however, the figure was related to the impact of foreign currency translation.
Mike Barnes, Signet's CEO, said, "We delivered a very strong second quarter with increases of 6.3 percent in organic same-store sales and 19 percent in organic earnings per share. Positive momentum at our U.K. division continued with our best quarterly same-store sales increase in seven years, at 4.4 percent, and our best operating margin in five years. Same-store sales at our Sterling Jewelers division, which includes Kay and Jared, increased 6.7 percent and delivered strong operating results. I would like to thank all Signet associates globally for their contributions to these results. "We are now even more excited about the acquisition of Zale, having begun the integration process. Our integration teams are successfully sharing best practices with implementation already benefiting both organizations and importantly, moving us forward in a positive way. We believe three-year synergy opportunities will be $150 million to $175 million, up from our previous expectation of $100 million," he said.
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